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Thursday, October 12, 2006
IBM Shifts Global Procurement Headquarters to China

This move illustrates a shift underway at IBM from a multinational corporation to a new model - a globally integrated enterprise

IBM today announced the relocation of its global procurement headquarters to Shenzhen, China as the company continues its strategy to draw more efficiently on its global capabilities and capitalize on emerging market opportunities. The decision to move Chief Procurement Officer John Paterson's office from Somers, NY, to China marks the first time the headquarters of an IBM corporate-wide organization has been located outside the U.S.

"In a multinational model, many functions of a corporation were replicated around the world -- but each addressing only its local market," said Mr. Paterson. "In a globally integrated enterprise, for the first time, a company's worldwide capability can be located wherever in the world it makes the most sense, based on the imperatives of economics, expertise and open environments."

Once this shift occurs, it requires a focused and thoughtful approach to simultaneously transfer knowledge and build the management capabilities to lead the work. Mr. Paterson is in Asia to do just that; to expand and strengthen IBM's internal procurement skills in the region; develop leaders and prepare them to take on global roles.

The other reason Mr. Paterson has relocated to Asia is to lead an effort to reshape the company's supply base in the region. Although IBM has been sourcing in Asia for more than 50 years, most of it has been in support of its hardware businesses. While that's still important, the demand for software and services skills -- across Asia and worldwide -- is growing. To meet the demand, it will require developing relationships with new partners and suppliers and working with existing ones to help them build skills, processes and management practices to compete globally in the services market.

IBM chose Asia as the global procurement headquarters because it already has more than 1,850 procurement and logistics professionals in the region, many of them at its China Procurement Center in Shenzhen, China, which has been in operation for more than a decade. The center is one of IBM's largest procurement organizations outside the U.S. The company also has strong and collaborative relationships with nearly 3,000 suppliers across Asia, accounting for about 30 percent of the $40 billion IBM spends annually on procurement.

Given the focus on Asia, Mr. Paterson said it is important for him to be there, yet he is quick to point out that cultivating the company's supply base is a global effort. "IBM has procurement professionals in 60 countries in 400 cities worldwide and the competitive advantage procurement provides IBM is to locate those skills close to our clients and suppliers around the world," he said. "That strategy does not change."

The move will help IBM expand its own capabilities, but it also has benefits for local markets. IBM's procurement activities have long aided the economic development of the regions from which it buys. In China, and in Asia, for example, Mr. Paterson says the investments IBM has made in its hardware business to ensure suppliers develop the capabilities to meet the very stringent requirements of IBM and its clients have helped those companies become more competitive and grow their businesses on a global scale. He expects the same scenario to play out in the software and services arena.

"IBM is a global company," Mr. Paterson said. "And today that is as much about making efficient and effective use of skills everywhere in the world and integrating them globally to serve clients, as it is about developing deep local relationships in markets around the world. We are becoming a globally integrated company that allows us to do both."

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