Closing The Last Supply GapClosing The Last Supply Gap

The way to solve that problem is at the local level, IBM says. In a strategy unveiled last month, the company plans to work with small-and-midsize businesses across China to help them build the infrastructures they need to better connect with international trading partners. The average Chinese small business must deal with 485 trading partners per month, says Dave Carlquist, VP for global emerging markets at IBM. "One of the biggest challenges for Chinese SMBs is improving connectivity," he says.

As part of the plan, IBM this year will open near Beijing University an SMB Innovation Center, staffed by IBM researchers who will work directly with Chinese application developers and business owners. The plan is to create software that Chinese businesses can use to more easily tap into the global supply chain. The lab will be part of an existing IBM research facility.

E-future Information Technology Inc. is a Chinese software vendor with which IBM researchers already are working. IBM wants to help the 260-employee company, which focuses on applications for retailers, make its supply-chain-collaboration software more com- patible with the major business applications typically used by multinationals. China's small businesses won't fully realize the opportunity to act as suppliers to the West unless they deploy systems that are compatible with large ERP applications such as SAP, E-future CEO Adam Yan says. "The firms these customers deal with want easy connectivity," Yan says through a translator.

IBM hopes that adapting software like E-future's to take better advantage of the collaborative tools built into its middleware products, such as WebSphere, will provide that connectivity while boosting its software sales in China. The country is one of several important emerging markets. In its most recent third quarter, IBM's combined sales to China, Russia, and Brazil rose 30%, compared with 8% in the Americas.

The growth of the small-and-midsize market domestically and worldwide is leading still other vendors into the fray. PeopleSoft last week unveiled its EnterpriseOne Rapid Start 8.11 software--a suite of ERP and CRM tools designed for small-and-midsize businesses. Increasingly, smaller manufacturers require sophisticated IT tools to keep up with their customers, PeopleSoft execs say. "The challenge to satisfy their big retail customers can be very complex," PeopleSoft marketing VP Andy Carlson says.

Unlike IBM, however, PeopleSoft is focusing its marketing efforts on Western businesses and their foreign subsidiaries. It's still cheaper for smaller local businesses in countries such as China to use labor, rather than software, to handle many business tasks, Carlson says.

Others see it differently. In July, Oracle opened a second development center in China--in part to focus on adapting its E-Business Suite Special Edition SMB product for the Chinese market. E-Business Suite Special Edition, available since September, is Oracle's entry into the small-and-midsize enterprise-software market. The suite offers modules that handle accounts payable, receivables, inventory, order-man- agement, and other functions.

Smaller companies may be the direct beneficiaries of these new products and services. But as they become more sophisticated buyers and users of technology, all businesses will benefit, IDC's Segal says. "The commercial ecosystem will operate more efficiently when we can get everyone onto a common infrastructure."

With Laurie Sullivan And Jennifer Zaino