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IBM expands its clout in developing markets
What's Big Blue up to in Brazil, China, India and Russia?

By Michael Kanellos

Published: Monday 22 August 2005

IBM will try to extend its roots in key emerging markets through a new education programme and greater co-operation with select venture capitalists.

Through its Virtual Mentoring programme, IBM will provide remote training to developers in Brazil, China, India and Russia, as well as give participants access to IBM hardware and software to help them develop their own products.

Additionally, the company has created the Venture Capital Advisory Council (VCAC), a group of VCs that will meet with IBM to compare notes on trends and notable companies in these countries. While IBM conducts meetings with a wide variety of venture firms, it will consult on a more regular basis with its VCAC members.

Buell Duncan, IBM's general manager of independent software vendors and developer relations, said: "We use this council for advice. Think of it, if you will, as market research on where the market is going."

Initial members include Tim Draper of Draper, Fisher, Jurvetson; Richard Frank, CEO of Darby Overseas Investments, which specialises in Latin American investments; and Lip-bu Tan of Walden International, a US firm focused mostly on semiconductor firms in China.

Not only are nations such as China producing far more products than in the past, they are also minting quite a few software developers. In 2004, more than 400 developers in emerging markets joined one of IBM's partner programmes.

The company that can tap into this growing population of programmers, the theory goes, will be able to snag larger shares of the market in these nations. Tapping into these markets, however, requires a substantial amount of diplomacy and reconnaissance work.

As in its other geographic markets, IBM's primary interest in emerging markets is to sell services as well as back-end systems for enabling e-government and other applications. To help ensure that these alliances will work, the company says it has restructured itself to reduce potential conflicts of interest.

For instance, IBM does not place direct investments with start-ups, leaving that instead to VC firms. The company co-operates with VC firms to gather intelligence and the firms reciprocate, said Claudia Fan Munce, vice president of corporate strategy and managing director of the Venture Capital Group.

"They understand our strategies and channel opportunities to their companies," she said.

IBM also does not sell software applications - as does, say, Microsoft - and can thus present itself as the safer partner figure.

Michael Kanellos writes for CNET News.com