Tuesday, November 14, 2006

IBM in bid for Chinese bank

Bloomberg carried an interesting tidbit of news yesterday regarding rumours that IBM would join Citigroup's $3 billion bid for China's Guangdong Development Bank. For the full story on Bloomberg click here.

According to the Bloomberg report, two unnamed sources said IBM may take a 5% stake in the Guangdong bank, which would help it in its efforts to win a contract from the Chinese bank to upgrade its IT systems. If the deal goes ahead, it will certainly signal the start of an interesting trend in IT services delivery, particularly in the fast growing Chinese market, where a number of major IT services providers are eager to win new business.

It does raise a number of questions though. If IBM were to gain a 5% stake in Guangdong Development Bank, does that mean that it would have first right of refusal over any IT work that needs to be done within the bank? And what would this mean for other IT services providers that may also want to bid for business with the bank?

Admittedly 5% is not a controlling stake, and arguably a company of IBM's scale with a strong IT services and software business devoted to the financial services sector would have a lot to offer a Chinese bank looking to upgrade its IT systems. But isn't it more a question of if Big Blue buys a stake in a bank it wants to do business with, does that give it an unfair advantage over other IT services providers seeking to win business from the same Chinese bank?

In a separate development, the Bloomberg report went on to talk about allegations that IBM paid $225,000 to a sales agent who is accused of bribing the former chairman of China Construction Bank, the country's fourth largest bank. According to FT reports, Zhang Enzhao, former chairman of China Construction Bank, was jailed for 15 years last week after being convicted of taking bribes in return for granting information technology contracts.

1 comment:

Anonymous said...

Initially, I raised the same questions. Why would IBM do that? Gaining access to the Bank? Self-dealing in a way. But 5% isn't a lot. So it is perhaps trying to infiltrate and learn...and leverage its experience at the GDB...