By Ellen Huber

On August 22, International Business Machines Corp. (IBM) and China’s Inspur Group Co., Ltd. (Inspur) announced that they have agreed to join a partnership involving IBM’s software and Inspur’s hardware in hopes to bolster their own businesses in China, Bloomberg reported.

Inspur, China’s largest server vendor and the first Chinese company to fully develop and produce high-quality hardware, agreed to use IBM’s database and WebSphere software on its servers and use IBM’s Power8 chips to develop its own server systems, according to Reuters.

In addition to revenue earned from Inspur purchasing software licenses, IBM hopes the deal with help it turn around its troubled sales in China after suffering a 20 percent loss in the first three months of 2014, according to the Bloomberg article. Inspur is using the deal to attract customers, particularly Chinese state-owned enterprises (SOEs), to its hardware.

This partnership came as a surprise to many, as the two companies very recently engaged in a rivalry rooted in cyber security concerns. The announcement of the partnership made no mention of such concerns. Both Inspur chair Sun Pishu and IBM Greater China head D.C. Chien, in separate statements, said they were committed to grow the relationship between the companies, according to the Reuters article.

In 2013 Inspur launched a marketing campaign called “I2I,” or IBM-to-Inspur, seeking to replace IBM as the go-to servers for China’s SOEs. In May 2014, Inspur fed Chinese news outlets stories of it beginning to replace dominant IBM in large financial institutions – painted as a threat to cyber security – in China altogether.

Also in May, Bloomberg reported that China was investigating whether domestic banks’ reliance on American technology posed a threat to national security through possible data leaks. According to China Daily, IBM said that Chinese banks never stopping buying its products and that the Chinese government never officially discouraged it.

Chinese commentators have bolstered Inspur’s campaign with increased calls to favor domestic  IT companies over foreign companies, particularly those that process sensitive information, according to the Reuters piece.

Photo credit Patrick H via Flickr

Posted by Ellen Huber