IBM takes its Bluemix PaaS to the Chinese market as reports arise that Big Blue is allowing the Chinese government to review its source code.
IBM this week announced it is making its Bluemix platform as a service available in China in collaboration with 21Vianet Group, a Chinese carrier-neutral Internet data center services provider.
Yet, IBM's Bluemix move comes at a time when reports indicate that IBM is allegedly sharing technology with the Chinese government. According to the Wall Street Journal, IBM is allowing officials from China's Ministry of Industry and Information Technology to review proprietary source code for some IBM products in a secure room. If the report is accurate, this would place IBM among the first U.S. companies to allow such technology sharing with the Chinese government, which has grown increasingly aggressive about oversight of foreign technology in the country.
The WSJ reports that Steve Mills, IBM's executive vice president of Software and Systems, gave a speech in Beijing Thursday where he disclosed the code sharing. However, the report could not be confirmed.
"The first thing that comes to mind is what source code they're talking about, an especially relevant issue given IBM's wealth of software assets," said Charles King, principal analyst at Pund-IT. "For example, if Mills was referring to code related to the company's Power Systems and chip architecture, that would make a great deal of sense since the IBM-sponsored OpenPOWER Foundation has several members based in China that are planning to make significant investments in Power architecture-based processors and systems."
In response to an eWEEK request for comment, IBM said in a statement:
"In a 2014 Open Letter to our clients, IBM stated unequivocally that we respect the security and privacy of client data. IBM does not provide government access to client data or 'back doors' into our technology. That commitment remains firm.
"In support of both the principles in that letter and the interests of our clients, IBM has in several countries established the capability to conduct limited demonstrations of specific aspects of our technology in highly-secure, controlled IBM environments that have no external communication links. This is done to reassure key stakeholders, including our clients, that no means exist for other parties to access IBM technology or data we manage on behalf of clients. Strict procedures are in place within these technology demonstration centers to ensure that no software source code is released, copied or altered in any way. Those are applied rigorously regardless of country.
"IBM operates in full compliance with U.S. export regulations, and maintains total control of its technology during these demonstrations. These technology demonstrations are not unique to IBM. In fact, several U.S. technology companies, including Microsoft, have established similar programs in China."
IBM invests heavily in the Chinese market and looks to it as a key source of growth. However, in its last earnings report for the second quarter of 2015, IBM said revenue from the BRIC—Brazil, Russia, India and China—countries was down 35 percent. Overall, IBM's revenue for the quarter was down around 1 percent.
During his earnings call with analysts, Martin Schroeter, IBM's senior vice president and chief financial officer, said revenue from IBM's growth markets decelerated driven by the BRIC countries. "To put it in perspective, the BRICs impacted IBM's overall revenue growth rate by two points in the second quarter, or said another way, our revenue excluding the BRICs would have been up 1 percent," he said.
"Within the BRICs, only India had modest growth, building on improved operational performance in services," Schroeter said. "The other three countries were down at a double-digit rate. Brazil was down 16 percent, though our revenue in Brazil last year was up over 20 percent, so it was a very tough compare. The volatility of our results in Russia continued. And our revenue in China was down 25 percent, with fewer large transactions in the quarter. Outside of the BRICs, many countries improved their performance sequentially."
The Chinese IT market continues to be a tough nut to crack for many U.S. companies, as they figure out ways to appease the giant while trying to conduct business under scrutiny.
Meanwhile, IBM launched Bluemix with a $1 billion investment in 2014.
"Cloud computing is the cornerstone for helping organizations drive innovation and entrepreneurship in China," said Robert LeBlanc, senior vice president of IBM Cloud, in a statement. "We believe that the launch of Bluemix will help China's burgeoning community of developers create apps that have the power to impact and change industries throughout the country. The collaboration with 21Vianet Group builds on the growing global adoption of Bluemix, and we are excited to bring it to the rapidly expanding developer population of China."
IBM's Bluemix catalog includes more than 120 tools and services spanning categories of big data, mobile, Watson, analytics, integration, DevOps, security and Internet of things.
"IBM is a global, leading enterprise-level cloud computing provider," said Josh Chen, chairman and CEO of 21Vianet Group, in a statement. "This news is the extension of IBM's collaboration with 21Vianet in 2014 on Cloud Managed Services. 21Vianet will now also work with IBM to promote the development of enterprise cloud computing in China. Using Bluemix, we'll provide more open enterprise cloud computing development environments, and build a complete enterprise cloud computing ecosystem with other domestic and foreign services providers throughout the country."
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