The initiative is the result of an agreement between IBM and Wuxi Tai Lake Industry Investment and Development Company Limited.

“The announcement states;

IBM will work with Wuxi Tai Lake Industry Investment and Development Company Limited; the Wuxi municipal government; and its business partners to build the China Cloud Computing Center, which will be a shared facility providing each software company in the park with its own virtualized computing resource. For example, a company will be able to use the allocated resource for designing, developing and testing its software products. Such virtual environments can replace the traditional data center model, in which each company owns and manages its own hardware and software.

While this is one of many announcements that IBM has made with respect to its investment, and business interests, in China (And you can expect to see LOTS of announcements from IBM concerning projects that it is kicking off in the BRIC (Brazil, Russia, India, China) countries, as well as in other emerging economies like Vietnam, and continental Africa over the coming 12 months) – I think it’s important because it highlights a number of things that western companies, and indeed western governments, seem to completely misunderstand.

Another very smart move by IBM

Perhaps you need to be an organisation that is nearly a 100 years old to take the kind of “long view” that IBM takes to some of its strategic decisions. IBM will be “officially” 100 years old on the 16th June 2011 – The company can trace its roots back to the late 1800’s, but the current corporation was founded as CTR in 1911 and then changed its name to International Business Machines in 1924 (See this history of IBM).

As an aside, I once asked an audience of IT Managers to put their hand up if they could tell me precisely how many employees, how many data centres, and how many sites their organisation would have in 10 years time. Only one person was confident that he could tell me that – He was from a 2000 year old organisation; the Catholic Church.

IBM’s age does, I believe, bring a level of maturity that younger organisations simply lack. I met Steve Mills (GM of IBM’s Software Group) yesterday, and one of the things he said highlighted this level of maturity-

We don’t think in terms of eliminating the competition, we expect most of our key competitors to be around for a long time to come

A far cry from the “we’re gonna Kill XYZ” utterances of some of IBM’s competitors.

IBM’s investment in China has a long history, and the current investments that the company is making will pay dividends over the long term (and for a long time).

And, remember, that IBM isn’t just making investments in China. You can add India, Brazil, Russia, Vietnam, and Africa to the list of places where IBM is investing.

These are long term plays, that only a smart company that has a long-term vision makes.

IBM and the “Globally Integrated Organisation”

IBM has done a lot of thinking about what it means to be “Global”. They’ve come up with the term “Globally Integrated Organisation” to describe an organisation that isn’t “directed” from a single HQ in a single country. A Globally Integrated Organisation is one where business processes are performed wherever makes most sense for the corporation as a whole. Instead of the classic “Hierarchy”, business units span the globe – teams are global, lines of management span timezones and the corporation is fully engaged wherever it is located.

IBM is fast becoming a template for the Globally Integrated Organisation (which helps to explain why they like to talk about it so often!) – it’s a template that other companies ought to emulate.

IBM and the Global Innovation Outlook

Another initiative that ties in closely with this topic is IBM’s very significant investment in genuinely global research on key topics. IBM’s GIO programme runs on an annual basis and seeks to engage with smart people from business, technology, and academia all over the world to consider specific questions. Last year’s GIO programme was focussed on Africa – and IBM (along with a couple of partners who joined in supporting the GIO project – including Cisco) – presented the results at a hugely interesting conference at the end of last year.

The GIO process undoubtedly benefits IBM – but any benefits that IBM derives from it will be over a long term, something like the GIO would be hard to justify on a quarter-by-quarter basis but as a means to establish what opportunities might be available to you in three (or ten) years it’s a powerful approach.

My analysis

There are several reason why I think this is significant, I could (and in fact I intend to) write a much longer piece on this But briefly, I’ll look at this from a global economic perspective, from the perspective of national economic policy, and from the perspective of the global corporation.

The Global Economic Perspective
Looking at things from a global economic perspective, you can’t deny that the balance of economic power in the world is changing. While many in the west (and I’m using the term “western” to describe the economies of greater Europe and North America) have fallen into the trap of believing that “Globalisation” means the ability to exploit resources on a global basis – A kind of economic imperialism that is much celebrated by the Right (Rumsfeld et al) and much decried by the thinking Left (Chomsky et al) , the emerging economies have largely figured out that they have as much of an opportunity to exploit their internal resources as the western, and they plan to do so.

In Tom Feidman’s book “The World Is Flat” (a book I have serious issues with, as it happens) Friedman quotes Rajesh Rao, CEO of Dhruva Interactive;

India is going to be a superpower and we are going to rule
(Friedman, T – “The World Is Flat” (Hardback edition) p191

No matter how many smug and narrow-minded books we read, describing the changes that are taking place as a “threat” is like describing the tide as a “threat”. They’re happening now, and we can either huddle together like King Canute and his pals and deny the inevitable – Or we can figure out how to manage our way through this inevitable change.

The winners of the future are the ones that embrace the change that is coming – and do something positive about it

National Economic Policy

Many of the emerging economies (notably China, India and Brazil) have very well defined programs designed to promote commerce within their national boundaries. China and India are creating dozens of special “zones” that are intended to act as a cradle for commerce, innovation and entrepreneurship. These zones are the subject of massive investment, and very significant long-term planning. In China, for example, the siting of Schools, Universities, Power Plants, Transport infrastructure etc etc is all influenced (if not completely governed) by a long term plan.

None of the western nations make anything like the same investment in long term economic planning – We trust “the market” while the likes of China are choosing to “change the market”.

China’s investment in special commercial and industrial zones will make China more competitive, more innovative and more successful – and western nations have to step up in terms of their willingness to make the same kind of investment

The Global Corporation

Too many western corporations view countries like China as simply a “market” to exploit. The number of times I’ve heard marketing people waxing lyrical about China being a market of “1.4 billion consumers”, without a single thought as to what proportion of those consumers can afford their products (When you look at wikipedia you see that if you separate the rural population in China which had an average annual per capita disposable income of household in 2005 of U.S.$397 from the urban population with an average annual disposable household income of U.S.$1,281 the “market” opportunity narrows to something similar to the population of the US (only with an annual income of 1/20th of the average in the US).

This “market to exploit” notion is a fallacy not just because of the reality of that market’s spending power – but also because international corporations simply wont be permitted to get away with exploitation. The governments of the emerging economies (and this is particularly true of China) will reward companies that demonstrate a long-term commitment to investment in their countries. Smart global corporations will already have invested in China (IBM has been present for two decades), those corporations that haven’t yet will need to step up and show some commitment.

Smart corporations will see emerging markets as an investment opportunity, not just a “market of potential buyers”