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Thursday, 29 May 2014 21:11

IBM ban rhetoric tightens US-China tensions and threatens Big Blue Featured

IBM ban rhetoric tightens US-China tensions and threatens Big Blue

International observers have been warning about this for some time but now the chickens have come home to roost. US security bans on Chinese technology companies are being reciprocated. With the most recent ban on IBM from Chinese banks being mooted, the question is who stands to gain anything?

It has been widely assumed common knowledge since the days that James Bond movies became pop icons that countries with differing political ideologies spy on each other. We expect diplomatic staff to be infiltrated with agents engaged in covert espionage.

Thankfully, aside from all of this cloak and dagger nonsense, nations with different political ideologies have rarely in the recent past allowed this to interfere with their trade relations. Even during the height of the cold war, Australia was selling its wheat and wool to China.

Times are now very different. China is a manufacturing giant of technology and the US, as well as allies such as Australia, Canada and Europe, are among its biggest customers.

Thus, when the US issues an edict that suggests that technology from Chinese tech companies, such as Huawei, are not to be trusted for use in government applications, and Chinese military officers are indicted for industrial espionage, it is only natural to expect blowback.

In this case the potential blowback is by no means trivial. If the Government of China is serious, banning IBM servers from its banks and replacing them with local substitutes could be very serious indeed.

IBM is a company that is already in decline. Its revenues and profits are stultifying and staff numbers are being slashed by tens of thousands. One of the few growth markets for its big iron hardware has been China – more specifically the gigantic Chinese banks, where IBM servers are widely deployed.

IBM invented the business PC market, only to see it ripped away by Microsoft and Intel in the mid-1980s.

With the sale of its PC business to Chinese company Lenovo in 2004, IBM admitted defeat and signalled that it was returning to its core business of big iron mainframe servers, where it had no real rivals.

The sale to Lenovo was also strategic because it forged relationships between Big Blue and China, a country with great growth potential.

This would appear to be a very good strategy because China has the largest banks in the world and they all run on IBM mainframes. Therefore when an edict comes down to those banks from the very top echelons of the Chinese Government, IBM, as powerful as it may seem, has cause to sweat bullets. And what hurts IBM also hurts America.

The real issue here is that all this could have been avoided if there was a political will. Turning one of the world’s largest communications companies Huawei into a pariah that is not to be trusted with government contracts and indicting senior Chinese military officials for industrial espionage were bound to have reciprocal consequences.

Of course, this whole affair has nothing to do with cyber security. The whole charade is really about money.

There are many who do not embrace the concept of globalisation. The US has no cause to complain when its companies manufacture products for pennies on the dollar in countries like China. However, if those same countries try to compete and dump their own products in the US and Western countries at even cheaper prices then the West cries foul and looks for excuses to curb the competition.

The result of all this cyber economic warfare is first that everybody loses economically.  However, second, and far more important, is that the manufactured rhetoric creates an atmosphere or tension and mistrust, which in turn leads to, dare we say it, open hostilities that create business not for peaceful technological pursuits but for the military industrial complex that President Dwight D Eisenhower warned us about in his parting speech upon leaving office.


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Stan Beer


Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.



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