Interface News Reporter | Chen Zhenfang
On November 23, 1994, in the winter of Shanghai, 23-year-old Zhang Minglang finally quit his stable job after three months and received a new era ticket - an offer from IBM's Greater China headquarters.
This also means that Zhang Minglang's monthly salary has skyrocketed from 500 yuan to 2700 yuan, and IBM headquarters has given him an additional 800 yuan to buy "clothing" so that employees can wear appropriate suits to meet clients.
Zhang Minglang graduated from the Department of Computer Science and Engineering at Shanghai Jiao Tong University in 1993, which is the only major in the department. After graduation, he entered a company at Shanghai Jiao Tong University as a major programmer. In November 1994, Zhang Minglang left his former employer and joined IBM.
This year, Lou Gerstner took over IBM, which was facing a huge financial crisis, and vigorously promoted reforms. He also transformed IBM from a hardware manufacturer to a company that provides comprehensive services, including software and services.
In response to the call of the headquarters, IBM Shanghai established a software department in 1994, and Zhang Minglang became one of the first employees here. His fate changed as a result.
Zhang Minglang remembers that during its peak, the sales of IBM software far exceeded the total sales of companies such as Microsoft and Oracle. The IBM system is very complete and has abundant resources. They have the opportunity to rotate and work in IBM software labs around the world.
As a new thing, software was still very difficult to sell in China at that time. Zhang Minglang still remembers that the first order he and his partners sold was a software set to Baosteel Group for $50000, and the entire team was particularly happy.
As early as 1934, IBM opened its first office in Shanghai. After the establishment of diplomatic relations between China and the United States in 1979, IBM opened a representative office in China and officially entered the Chinese market five years later. In 1992, IBM established a wholly-owned subsidiary in China, International Business Machines (China) Co., Ltd.
In the year when its subsidiary was established, IBM China generated profits mainly from mainframe computers. For this reason, IBM China also distributed a one dollar souvenir to its employees. This is the beginning of IBM's long honeymoon period with China.
Since the 1990s, foreign companies have gradually increased their investment and established branches in China, and with China's accession to the WTO in 2001, foreign companies officially entered a golden age of rapid development in China.
IBM's then CEOs Guo Shinar, Peng Mingsheng, and Luo Ruilan visited China multiple times during their tenure. In 1997, then President Jiang Zemin met with Guo Shina and his delegation at Zhongnanhai. Guo Shina said at the time, "IBM is willing to build its company in China into a large corporation, serving China's modernization construction and creating opportunities for China in the high-tech field. We hope to use IBM's information technology advantages to help the technological transformation of Chinese state-owned enterprises and enhance their competitiveness
At that time, IBM had thousands of applicants for every social recruitment, including written exams, intelligence tests, and multiple rounds of interviews, resulting in a very high elimination rate. In addition to high salaries, young people can work in cutting-edge technology industries, stay in five-star hotels for business trips, and enjoy high salaries, benefits, and social status.
During the golden age, IBM held a monopoly position in the competition for banking clients, with a significant proportion in telecommunications, energy, manufacturing, transportation, and e-government businesses. The business is thriving, and Zhang Minglang's position is also on the rise. Until the end of 1999, when he left IBM, Zhang Minglang had become the technical leader and his salary had increased to 25000 yuan, with a monthly salary increase of more than 9 times. The software department he works in has also grown from a few person department to a team of over a hundred people.
But 30 years later, IBM once again entered Zhang Minglang's vision with the news of its closure of its research and development center. This means that IBM's 30-year domestic research and development system in China is about to go completely into the past.
Drawing: He Miao
Sudden layoffs
We are withdrawing from all development tasks in China
On August 26th, after the weekend panic of access privileges being revoked, employees in IBM China's R&D and testing positions finally received this news. Jack Hergenrother, Vice President of IBM Global Enterprise Systems Development, made the above "verdict".
IBM Infrastructure has decided to transfer the research and development work of the China System Laboratory to other IBM infrastructure bases overseas and withdraw all research and development work from China. Jack Hergenrother stated that this is a 'difficult decision' as the business transformation is influenced by market dynamics and intense competition. China's infrastructure business has declined, while IBM has shifted its business to other countries closer to its customers based on market opportunities.
IBM has consulting services, technology division, research and development division, global enterprise consulting services (GBS), systems and technology division, software division, global technology services (GTS), global finance division (IGF), partner ecosystem, and AI platform (IBM Watson).
Previously, Interface News learned from multiple IBM China employees that the company closed the access permissions of IBM China's R&D and testing staff on the evening of August 23. The permissions of R&D and testing staff in Beijing, Shanghai, Dalian and other parts of the country were revoked, involving over a thousand people. IBM will provide N+3 compensation to laid-off workers, plus a 2-month buffer period, and is expected to complete this round of layoffs by the end of October.
The employees whose permissions have been revoked this time belong to IBMV, which has CDL (IBM China Development Center) and CSL (IBM China System Center) under its jurisdiction. This team supports global product development.
An IBM employee told Interface News that the CDL and CSL R&D teams will be disbanded and transferred to India. With the closure of CRL (China Research Institute) by IBM in 2021, IBM's domestic R&D system in China has officially become a thing of the past.
CDL was founded in 1999 as a testing center for IBM software products. It later grew into one of IBM's top five software labs worldwide, providing development, testing, globalization, technical support, and customer service to IBM. At its peak, CDL had over 5000 employees.
CDL has a high status in IBM China, and in terms of the products it participates in, there are basically no scraps, "said Li Muyuan, a former employee of the department, to Interface News. It is the only center of IBM that simultaneously develops five core brand software (Java, Lotus, Information Management, Tivoli, Rational), and has participated in the development of hundreds of IBM products.
CSL was established in 2004 and is mainly responsible for system level research and testing, including chip design, server architecture, operating systems, virtualization and cloud software, system management software, etc.
After officially entering China, IBM was one of the first foreign-funded enterprises to establish manufacturing, procurement, and research centers in China. Nowadays, IBM is accelerating its subtraction efforts in the Chinese market.
Many employees believe that this layoff is just the beginning. Several IBM employees have revealed on social media that layoffs are expected to continue until the end of March next year. A Dalian IBM employee told Interface News that she is waiting for a leadership interview. In addition to CDL and CSL, CIC in Dalian is also laying off employees, while GBS's business continues to shrink, and many employees are looking for new jobs.
Defeated step by step
In fact, IBM's business in China has already sent a dangerous signal.
Many IBM employees who were interviewed by Interface News coincidentally mentioned that they had less work to do.
A current IBM employee told Interface News that as early as last year, some employees responsible for projects in China were transferred to other projects, and the released business was also transferred to India. At the same time, IBM India is still recruiting personnel and building laboratories. But she believes that this is a long-term event with a period of transition, and she didn't expect it to come so soon.
Since I joined the CDL large-scale unit, I haven't had any serious work to do. "When Li Muyuan joined in 2013, he had already discovered that IBM's business volume was very small, and the core reason for the termination of CDL this time was that" there wasn't much work to do. Milan, a CDL employee located in Shenzhen, was also laid off in July last year, when the company had already started small-scale layoffs.
At present, IBM's business in China is still operational, including GBS, consulting services, and after-sales support, focusing on two aspects: going global and AI. In March of this year, Chen Xudong, Chairman and General Manager of IBM Greater China, announced three strategic priorities in China: tapping into key customers, breaking through new markets, and vigorously expanding channels.
But in recent years, IBM's business performance in China has been mediocre, particularly evident in its financial reports.
According to the 2023 financial report, IBM's revenue in the Asia Pacific region, Europe/Middle East/Africa, and the United States markets accounted for 18.92%, 29.89%, and 51.19% of the total revenue, respectively. The revenue share and growth rate in the Asia Pacific market are much lower than those in other markets. However, the income in the China region decreased by 19.6%, becoming one of the main reasons dragging down the growth rate of income in the Asia Pacific region. In the first half of 2024, sales in the China region declined again, with a year-on-year decrease of 5%.
Drawing: He Miao
IBM executives have long been aware of the downturn in the Chinese market.
In 2018, Chen Liming told Caijing magazine that IBM's business in China had experienced very rapid development in the early years, which was closely related to the policy environment, market environment, and customer demand for us at that time. Over time, local enterprises have also grown, and the market and policy environments have undergone significant changes.
Chen Liming said, "The real concern is that China, as the second largest economy, is developing so rapidly and has such strong innovation vitality. It is unreasonable for IBM's business in China not to develop faster. Therefore, we hope to have more courage, take faster steps, and seize this development opportunity
However, the popularity of the Internet has promoted the rise of small and medium-sized enterprises. They have strong demand for flexible, low-cost cloud services. IBM has lost its competitiveness in this rapidly growing customer group.
Zhang Ningyuan joined IBM in 2007 and has been responsible for supporting Japanese operations and GBS projects. When he joined, IBM was still an enviable foreign company, synonymous with high salaries, dignity, and advanced technology.
In 2007, Shanghai's offshore development entered the integration stage, and IBM and Accenture integrated a large number of offshore outsourcing resources in a short period of time. From 2007 to 2014, with the advantage of exchange rate and national support, this business developed rapidly.
At that time, Zhang Ningyuan often took on multiple projects and traveled back and forth between Shanghai and Japan. During this period, IBM attracted a large number of outstanding employees with good education and work backgrounds through its strong corporate culture and abundant resources. However, with the rise of the Chinese economy, the past advantages in labor costs and exchange rates have begun to shrink. Many foreign companies have started to relocate their outsourcing business to India, Southeast Asia, and other regions.
From 2009 to 2012, after the global financial crisis, IBM began to enter the fields of cloud, AI, and e-commerce, but never seized the opportunity and instead began to "lose orders".
Zhang Ningyuan believes that IBM's premature abandonment of its C-end business (selling its PC business to Lenovo in 2004), coupled with the continuous decline of the company's B-end business and the slow pace of internal operations leading to the loss of excellent personnel, have all contributed to IBM's failure in the Chinese market. "The slow pace of large companies and outdated technological architecture cannot support the rapid development of domestic business
In recent years, IBM has been focusing on tapping into private enterprise clients. But Zhang Ningyuan, who used to work in private enterprises, is relatively pessimistic: "More than a decade ago, Chinese private enterprises needed consulting and strategic transformation, but now they need solutions to be quickly implemented and effective
The benefits brought by large clients are guaranteed income in droughts and floods, and no worries about food and drink, but they pursue stability rather than innovation - IBM employees work hard to develop new features, but companies dare not use them, and the integration of new features will also encounter problems. IBM employees have realized this early on, innovation is not encouraged, and they lie in the past and eat from the old.
To survive in China, foreign companies need to have a rapid transformation plan that matches the domestic market and national strategy. As an offshore cost center, they will eventually face the result of leaving, "said Zhang Ningyuan.
The 'Go IOE' Movement
Several employees interviewed by Interface News mentioned that the "de IOE" movement directly caused IBM to lose its foothold in the Chinese market.
In 2009, Alibaba was the first to shout out& quot; Go to IOE& quot; Many domestic enterprises have also followed suit in the transformation movement& amp;quot; Go to IOE& quot; It refers to getting rid of dependence on IBM mini computers, Oracle databases (Oracle Corporation, a database software provider), and EMC storage devices (Yianxin Corporation, a data storage device provider).
Alibaba proposes to build a more flexible and cost-effective distributed IT architecture to support its rapidly growing business needs and massive data volume.
IBM as& quot;IOE" In the& quot;I"， IBM's hardware equipment and related services, such as small and large computers, are the core components of many enterprise IT infrastructure. With the rise of cloud computing and open source technology, some enterprises are exploring the use of more economical and scalable IT solutions, leading to a continuous loss of IBM customers.
Li Muyuan told Interface News that at that time, IBM's mainframe (z series) and mini computer (i series) could easily be replaced by cloud platforms based on microcomputers (x86 microcomputers).
Firstly, there is the super flexible mechanism of "pay as much as you use computing power" in cloud platforms. IBM's large/small computers also have similar charging methods, but they are both based on MIPS architecture, which is less flexible than cloud platforms. Secondly, there are many competitors in the cloud market, and the prices are relatively low, cheaper than IBM mainframes.
IBM has "lost" the cloud computing and artificial intelligence markets, especially under pressure from Amazon Web Services, Microsoft Azure, Google Cloud, and local Chinese enterprises. In addition, the Chinese government's self controlled policies have encouraged domestic enterprises to make progress in core technologies and reduce their dependence on external technologies.
In May 2013, Alibaba's last IBM minicomputer was offline on Alipay. In July of the same year, the Oracle database used in Taobao's advertising system was also taken offline, which was an important node in Alibaba's technological development process and also; quot; Go to IOE& quot; An important milestone in the cultural movement.
Drawing: He Miao
It was not until 2015 that IBM belatedly launched its cloud platform, Bluemix, but this move did not save the company's decline. During this period, Chinese state-owned banks gradually decoupled from IBM products, and banks were once the largest IBM customer group of the "Zhang Minglang" in the 1990s.
It's too late, "Li Muyuan pointed out," Bluemix is being squeezed in both domestic and foreign markets and has no fighting back. Amazon Web Services (AWS), Google Cloud (GCP), and Microsoft Cloud (Azure) from abroad have already divided the market completely; Alibaba Cloud is thriving in China, followed closely by Tencent Cloud, and Huawei Cloud is also a strong rising star.
After 2019, IBM rarely mentioned Bluemix in public.
Zhang Ning is quite regretful about this. "Many products are stunning at the beginning, but lack sustainability, such as the most typical Bluemix and Watson." He believes that there are two reasons for the failure, one is that the internal R&D cycle is relatively long and cannot adapt to market changes. Secondly, due to insufficient product strength, opportunities and customers are lost externally, and many of IBM's technologies lack practical implementation scenarios.
Of course, going to IOE is also a major factor. "As Zhang Ningyuan said," Going to IOE has led to the loss of customers, a decrease in business and demand, and a simultaneous impact on the company's internal sales, technology, operation and maintenance product lines, as well as China's investment and development strategy
IBM's first major defeat in China was the failure of its cloud business. But from a different perspective, it was also a victory for Chinese companies, "said Li Muyuan.
Zhang Ningyuan clearly felt that since 2014, IBM has been trapped in a vicious cycle of low-priced competitive projects, with unattractive salaries and a gradual loss of excellent talents. After low-priced projects became the norm, the scale of Milan's projects also changed. Projects that used to require 30 people have now become 20 people, constantly reducing labor costs.
Say goodbye to foreign companies
In the past two decades, IBM has made a series of strategic mistakes, including starting late in the field of cloud computing and missing opportunities to build its products and services using open source ecosystems; The traditional business market has been seized by cloud computing and modern service substitutes; The highly anticipated commercial application of the artificial intelligence platform Watson did not meet expectations.
Since 2012, IBM's annual revenue has been declining year by year, with a drop of over 100 billion yuan in 2013. By 2023, IBM's revenue will only be $61.8 billion.
The reason for the decline in performance is the decline in sales of traditional hardware business, while cloud computing and software business have gradually become IBM's core revenue sources. Although emerging businesses have grown rapidly, they have not fully compensated for the impact of the decline in traditional business.
In China, IBM faces a more complex situation.
The United States' restrictions on technology exports to China and sanctions on Chinese companies have made research and development cooperation, technology transfer, and cross-border data flow between China and the United States more difficult than ever before. Ten years before the rise of mobile Internet, people believed that the world would become more and more "flat". With the rapid flow of information, the gap between countries would be gradually bridged. But today, ten years later, globalization is starting to recede, and the idea of a "global village" has become a thing of the past.
Former employees of foreign companies, who were once full of vigor and envied, now live a life that others consider to be like a "nursing home".
In 2013, Li Muyuan joined IBM's CSTL (China Systems Technology Laboratory) to provide second-line technical support for distributed computing middleware. In 2015, he transferred to the CDL department and moved from the second floor to the third floor of the Huanyu Building. His most immediate feeling was, "There is really too little work
At the end of the year, an important task for IBM managers is to review everyone's vacation records and urge employees to take leave.
Salaries are also decreasing. After working at IBM for nine years, Zhang Ningyuan's position has been promoted by two levels, with a salary increase of less than 80%. He told Interface News, 'The salary is not very competitive, it just emphasizes work life balance,' which is also a common feeling among most old IBMers.
Between 2014 and 2016, Tian Tian in the GBS department felt that the consulting business was rapidly declining. Despite the company's call for cost control, the treatment for business trips continues to decrease, and the quality of business is also not high. Many projects have become the projects of the lowest bidder, and competitors are not as expensive as IBM in terms of manpower.
There were very few projects, the quality was not high, and it was a bit too easy. "As a young woman, she was in need of enrichment and soon left IBM.
Zhang Ningyuan believes that IBM's comprehensive enterprise management system and corporate style have cultivated employees' professional ethics and abilities. The care for employees and emphasis on work life balance in foreign companies have influenced a generation and indirectly shaped the values of foreign employees.
The current reality is a different picture, and employees who have left IBM are also quite pessimistic about the current market sentiment. Nowadays, foreign companies are no longer the first choice for highly educated graduates. Foreign enterprise employees who have gone through their entire youth from graduation to middle age at IBM are about to face even more brutal competition in the workplace.
In the second year after leaving IBM and working in Europe, Li Muyuan, 38, considered returning to China to work. He asked his acquaintances to help him submit his resume to Alibaba and other major Internet companies. In the end, there was no news.
Zhang Minglang clearly remembers that December 31, 1999 was his last working day at IBM, and due to the Millennium Bug incident, he worked until midnight. People believe that the millennium has arrived and everything will become better.
At that time, Zhang Minglang was poached by another American company with high salaries and embarked on a new life, with IBM about to become a thing of the past. At this moment, for thousands of employees in IBM's R&D system, it also has to become a thing of the past.