IBM THAILAND: A major investment in a new storage devices division is proof of the multinational's commitment to remaining on top of the local IT market

Some companies prefer to wait for the economic climate to improve and then invest when returns would be much greater. But a handful are pumping in funds and carrying out their original plans, even though they know they might be in for a rocky ride in the short term.

‘Information technology now has come to be aligned with the business environment, and now both have to go hand-in-hand. Therefore, businesses will have to spend money on upgrading their systems, no matter how much they try to avoid the expense’
WANARAK EKACHAI
Managing director

IBM is one of the latter. The world's largest information technology service company made a major commitment in 1996 and is sticking with it. It placed Thailand, Singapore, Malaysia, the Philippines and Hungary on its short list for a storage devices manufacturing plant worth $560 million.

Thailand emerged as the winner, and while events in subsequent months might have' persuaded International Business Machines to change its mind or find a new site, the company was not deterred. IBM Storage Products (Thailand) today is among the best examples of continuing commitment by a company to an individual country.

The IBM commitment dates back to 1952 when the US-based corporation was starting to expand its operations worldwide. Thailand was one of its first bases in the region. The main goal at the time was to supply the country's first card machine for a national census.

Many other firsts were to follow that early census-tabulating machine. The company supplied the country's first mainframe, an IBM S/360, to the Ministry of Defence in 1970s; the first online reservation systems for airlines; the first online banking system and automatic teller machine network.

Forty-six years into its relationship with Thailand, IBM Thailand believes it is in a position to emerge from the recession in even better shape than it was before the downturn began. One of the main reasons is the addition of IBM Storage Products.

The company's business arsenal now includes information technology hardware, software, operational, maintenance and network services, consulting services systems integration and applications development services.

Wanarak Ekachai, managing director of IBM Thailand, and director of IBM Storage Products, is a believer in discipline and preparedness, which helps to explain the company's positive outlook.

"I have always taken the worst-case scenario for the way I operate the company, 1 always imagine that if worse comes to worst, what would my survival strategy be?

The strategy has paid off, and today IBM claims to be gaining market share and hopes to continue doing so in the future. The company has not had problems with liquidity, nor has it had to lay off many staff.

Mr Wanarak attributes this to a conservative style of management. Because the company prepared itself well for the possibility of economic turmoil, its market share held steady even while the overall information technology market lost about 50%.

"It's like planting a tree," he said. "If you water it daily, if you put in fertiliser from time to time, if you trim it from time to time, 1 don't think you will have to worry too much about how it's performing.

"In the same way 1 have nurtured the company. I have been very cost-conscious from day one, and have always looked at was of trimming excess expenditure.
Over 46 years, IBM several IT developments in Thailand, from the first mainframe to the first automatic teller machine network.
111 don't give employees mobile phones as it will increase our costs both in terms of billing and the equipments, which may not be returned. I don't give managers cars or drivers, as they too increase expenses. But yes, we pay them better than the industry's average."

Mr Wanarak does not believe that the recession will deepen further, adding that IBM was ready to face the challenge come what may. One reason is that increasing demand for information technology is inevitable, unless businesses are intent on losing out to their competitors or failing outright.

With market needs changing on a day-to- day basis, and new software required to keep pace with new hardware and vice-versa, Mr Wanarak believes Thai companies will need to continue investing in information technology, no matter what the economic climate is like.

"Information technology, now has come to be aligned with the business environment, and now both have to go hand-in-hand," he said.

"Therefore, businesses will have to spend money on upgrading their systems, no matter how much they try to avoid the expense."

His aim is to respond to the needs of the market, in order to help business clients gain market share and prosper, which could increase demand for more IT products in the future.

IBM Thailand has achieved the world-standards expected of the parent company's illustrious name, he said. Its systems are priced at the, market rate, though customers sometimes perceive that the costs are high only because of the brand name.

Mr Wanarak believes that software developments will lead the industry to turn out new computers at a much faster rate than ever before. Thus, companies will have to set aside even larger investment budgets for IT.

The best option for some, he suggested, would be to try to lease systems and change them when they become obsolete. After all, few products' have a poorer resale record that outmoded computer systems.

"To facilitate the process of leasing, we have set up a separate firm that handles this part of the business," he said. "We always ask our customers if they would prefer this option when we make a deal with them, as it may end up cheaper in the end. It's the best option available for corporations at this time, and now it's being accepted by Thai people too."

Looking at the local IT industry as a whole, Mr Wanarak said it would start growing in single digits, a far cry from the boom years, given reduced purchasing power.

He attributed the sharp fall in demand to large companies delaying upgrading programmes, the closure of financial institutions, and the continuing credit squeeze.

"Two years from now, companies will still have to spend money on their IT, but the extent may be more limited," he said. "The trend may not be that bad, and the fact that the government has put a lot of emphasis on upgrading IT throughout the country should be a positive sign for the industry."

Mr Wanarak said the downturn had also made customers realise that they should trust only the best and strongest players in the market when they make a commitment to purchasing IT products and systems.

"Until last year, the market in Thailand was very competitive. We had around 42 competitors, but today the number has been reduced to around 12, as nearly 30 of them went bankrupt.

"And I see room for only five or six major players in the market, once the recovery kicks in."

He said the local operation benefited from the fact that IBM had a presence in more than 160 countries, so the multinational had plenty of experience in dealing with sudden market shifts.

The other advantage the company has is its research team in Thailand, which has introduced several technological breakthroughs for Thailand. Among them was the development of Thai fonts for computers, and before that, typewriters that could handle both Thai and English characters.

IBM also hopes to see that more emphasis placed by educational institutions on computer literacy. Mr Wanarak believes the future of business will be all electronic, and that today's children must be well prepared.

"Sometimes you see a new graduate who has to attend 12 months or more of courses to learn how to use computers. I think that's a waste of human resources, not only for the company but the entire nation," he said.

To fill the gap, IBM's Thai operations have taken a leading role in distributing knowledge to the public by donating computer systems, software and even mainframes to colleges and schools around the country.

"When we talk about social contributions, people usually mean hard cash contributions,"
Mr Wanarak said.

"Well, I would say that IBM doesn't give hard cash. IBM gives out something more valuable: it gives out knowledge, which can then be used by the people of this country to improve the quality of their life and uplift the country."

IBM Thailand Co Ltd
Established: 1952
Major shareholders: IBM Corporation
Main businesses: IT solution products, computer hardware, software, system integration, global services, pre- and post-sales services
Number of employees: 450 for IBM Thailand and 2,200 for IBM Storage
1997 gross revenue: 5.3 billion baht for IBM Thailand
Manufacturing facilities: IBM Storage Products (Thailand)

Worldwide
Headquarters: Armonk, New York
Number of countries: 164
Number of employees: 280,905
1997 gross revenue: US$ 78.5 billion
1997 net profit: US$ 1 billion