It will be the first time IBM will have a global headquarters outside the United States, as well as being the first time a major technology firm has decided to locate its global procurement headquarters in China.

IBM said that the shift is part of its efforts to transform from a multinational into a globally integrated company.

"In a multinational model, many functions of a corporation are replicated around the world but each addresses only its local market," said IBM Chief Procurement Officer John Paterson.

"In a globally integrated enterprise, for the first time, a company's worldwide capability can be located wherever in the world it makes the most sense, based on the imperatives of economics, expertise and open environments," he added.

Eagle Zhang, senior vice-president of the domestic consulting firm Analysys International, said that IBM, often regarded as a trailblazer, had now set another example for fellow multinational firms to follow.

"It is a very significant event in this industry," said Zhang, who added that IBM would make big savings after its procurement headquarters moves to Shenzhen.

The southern Chinese city, neighbouring Hong Kong, is already a major manufacturing centre for IBM, where it makes its servers, its major hardware product following the sale of its personal computer business to Chinese firm Lenovo.

Shenzhen is also one of the world's most important computer and communications hardware manufacturing bases.

IBM has more than 1,850 procurement professionals and nearly 3,000 suppliers in Asia, where it buys 30 per cent of its US$40 billion supplies every year.

Apart from hardware, China has also become an important sourcing destination for IBM's software and services, so this requires the company to build relations with new partners and suppliers in Asia and improve their skills, processes and management capabilities.

China has already become a major procurement base for most of the major technology giants, such as Motorola, Ericsson, and Fujitsu.

South Korean conglomerate Samsung also moved its international purchasing centre from Hong Kong to Shanghai.

Last year, it bought products and services worth US$15.3 billion from almost 4,600 vendors in China. Its target for this year is US$18.5 billion.

A survey by global consultancy firm McKinsey of 39 US companies in China showed these firms only achieved a fraction of China's potential as a source of low-cost products.

The survey revealed that they only purchase 30 per cent of their potentials, with this figure expected to rise to 50 per cent.

They only achieve 25 per cent of potential savings in China, but this will rise to 40 per cent in three years, according to the McKinsey survey.

(China Daily 10/13/2006 page10)

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