Data with destiny
A pioneering spirit and plenty of legwork helped IT giant IBM gain a foothold in China 50 years ago this month, writes Bien Perez
Leung Kam-yuen, one of the first four employees of the then fledgling branch of IBM in Hong Kong, had no problem making 'boat calls'. The engineer saw it as simply part of his job during the 1960s. Several times each month, the International Business Machines (IBM) worker took a sampan and made the trip across bustling Victoria Harbour to a mooring near Green Island, where large cruise ships were usually anchored. While their passengers from distant lands took in the sights of the Far East, the engineer serviced the now primitive IBM typewriters used on board.
'The journey to and from the liners was always fun because of the views, and being out in the fresh air,' said Mr Leung, an engineer-turned-salesman who worked at IBM for more than 20 years.
That enthusiasm was fuelled by the staggering opportunities in Hong Kong's early information technology industry as the field opened up. There were huge profits to be made for pioneering computer companies such as IBM, which set up shop in the city 50 years ago this month.
The company's journey in Hong Kong has been spectacular, beginning life as a start-up branch with four employees. That office has grown dramatically to about 1,300 employees as IBM transformed into a global giant with more than 355,000 staff worldwide. The company's growth in Hong Kong chronicles the city's IT history.
Also known as Big Blue, IBM is one of the few IT companies in the world with a continuous history dating from the 19th century. The company was founded by American statistician Herman Hollerith as the Tabulating Machine Company in 1896. After a merger with two other companies, it became the Computing Tabulating Recording Corp on June 15, 1911, and was listed on the New York Stock Exchange in 1916. IBM adopted its current name in 1924.
In April 1957, barely a decade after the end of the second world war, IBM established its first Hong Kong office, at the Wing On Life Building in Central. Pong Pun-fong, who was head of IBM China in the 1930s and set up company operations in Taiwan in 1956, served as the founding general manager of IBM in Hong Kong.
During the 50s, foreign investment in Hong Kong swelled and helped establish the city as a strategic manufacturing and industrial centre for Asia. IBM's major clients came from the shipping and textile sectors.
According to The IBM Way, which gives an account of the company's history in Hong Kong, there was strong demand for its time recorders at local companies to keep track of employees clocking in and out. Early paging equipment was also used in hospitals, while office appliances, mostly electric typewriters, sold well.
In those days - when few buildings had elevators installed, IBM sales personnel built their reputation by going out to meet clients. Salesmen typically started on the top floor of an office building and worked their way down, floor by floor, as they introduced themselves to prospective clients, according to The IBM Way. No doubt, as IBM salesmen worked their way downstairs, they met salesmen from other sectors, all targeting the booming businesses involved in the manufacturing and trading revolution that was transforming Hong Kong.
By the 1960s, Hong Kong took the next step in office automation when IBM championed the use of punch-card machines. These devices provided a less tedious way of sorting data, and took a fraction of the time of doing it manually.
Around this period, IBM set up its service bureau to provide transactional services, involving payroll and inventory control, that addressed the business processing needs of clients. Data processing meant feeding decks of punch cards through a tabulating machine in careful succession.
Office automation then extended to time-keeping. In 1962, IBM installed clocks at Hang Seng Bank. The IBM clock system ensured that all of the bank's departments and branches functioned on the same schedule. 'We installed about 200 clocks, which was a big contract at the time,' said Mr Leung.
Business picked up so much that Mr Leung bought a new Volkswagen car in 1964 for the princely sum of HK$5,000. A top-flight IBM typewriter at the time cost about HK$4,500.
IBM's breakthrough deal came in 1965, when the Hong Kong and Shanghai Banking Corporation awarded it a contract to install the company's first System/360 mainframe computer in Hong Kong, a project that challenged then-computer rivals NCR and ICL.
'That deal firmly established IBM as an IT company that provided solutions to assist clients in transforming their business,' said Dominic Tong Wah, the current general manager at IBM Hong Kong. 'Prior to that, IBM was mainly known as a typewriter company.'
The mainframe installation, completed in 1967, changed the way cheque transactions were carried out at Hong Kong's biggest bank, also one of the city's largest corporations. Instead of just serving as a general-purpose computer, the S/360 spurred demand for purpose-built mainframes. It compiled bank accounts into an online system to speed up the processing of cheques and cash withdrawal during the pre-internet banking days.
As the 70s were drawing to a close, the demand for large computing systems continued to grow. IBM signed a contract with the government in 1979 to supply and install a new System/370 mainframe at the Inland Revenue Department.
The 80s was a decade of great change in Hong Kong amid an 'open door' policy initiated by Deng Xiaoping in 1979, which positioned Hong Kong as the gateway to the vast mainland market. It marked the start of a swift, steady move by Hong Kong manufacturers to establish new and low-cost plants across the border. IBM Hong Kong helped support that move when it installed its first mainframe computer in a mainland factory, at the city of Shenyang , in Liaoning province , which produced compressors.
The next great step was the landmark launch on August 12, 1981, of IBM's first personal computer - the PC 5150 - in the US. Six months later that same model was unveiled in Hong Kong and started the PC era in the local market. That revolution led to the steady demise of IBM's once-highly prized electronic typewriters.
Hong Kong's investment in IT escalated in the following decade as demand for high-performance, low-cost PCs spread from business and government into the consumer market. Legions of IBM PC clones also flooded the market in a growing challenge to the company.
Despite its best efforts, IBM steadily lost market share in the PC market and eventually sold off its PC division to mainland computing giant Lenovo Group for US$1.25 billion, a deal sealed in May 2005.
Before that sell-off, IBM was beefing up its expertise in server computers, storage systems, software and services. The shifting business emphasis also reflected the maturing of the Hong Kong IT market, which demands more so-called 'solutions' - which typically include a package of hardware, software and services - for projects that will help enterprises streamline operations, promote increased efficiency and raise their competitiveness against rivals.
Industry analysts forecast moderate growth for Hong Kong's IT services market in the next few years. IBM has focused on the areas where it sees the biggest opportunities: systems integration, business process management, and the outsourcing of data centres, desktop infrastructure and applications.
In 2003, IBM was awarded two of the most high-profile IT services contracts in Hong Kong by the government: a HK$350 million financial management and information system project at the Treasury and a HK$60 million IT systems contract with the Transport Department.
With the Treasury project, IBM Hong Kong was contracted to help the Treasury design and implement a web-based financial management and information system connecting about 5,400 users across all government departments. The new system is seen as critical for Hong Kong's move to an accrual accounting regime, a method used by businesses and many western governments. It was to replace the existing ledger accounting and financial information system.
Government transport planners considered IBM's Transport Information System project, once completed, would serve as the core infrastructure to gather, manage and disseminate transport data, laying the foundation for Hong Kong's Intelligent Road Network initiative.
Both projects were dogged by delays and were abruptly cancelled by the agencies concerned early in 2005. Threats of lawsuits have been aimed at IBM.
Mr Tong said IBM maintained a 'broad relationship' with the government. He noted that the company was behind the Immigration Department's successful Entry-Exit Processing and Record System. It has also remained a key IT services partner for large corporations, such as MTR Corp.
Although last year's experiences appeared to have blemished IBM's long record as a preferred IT partner of the government, few doubt IBM's role over the past 50 years in helping raise the bar for IT products and services in the city.