IBM Pushes Smarter Infrastructure Into Emerging Markets

IBM continues to invest in getting more of its infrastructure technology into IT-starved emerging markets.

IBM continues to push its smarter infrastructure technology into growth markets, which the company has targeted as a rich opportunity for expansion.

IBM, which has extended its banking technology into emerging markets, recently opened its first research center in Africa; the 2,000-square-foot facility opened Nov. 8 in Nairobi, Kenya. IBM Research-Africa addresses key challenges of the African continent through commercially viable innovations that affect people's lives.

In addition to Africa, IBM is investing more heavily in promoting its technology in Asia, South America and other emerging economies, where businesses are looking to technology to be a differentiator in how they deliver services to their customers and to gain some advantage over their competitors.

For instance, Phu Hung Life, a newly established joint-stock life insurer in Vietnam, announced it has selected IBM as its IT infrastructure provider. IBM has already begun implementing the first solution, capable of driving business innovation and transformation at the newly established insurance provider.

IBM officials said Vietnam currently has limited insurance penetration and significant growth potential based on the promising demographics, growing middle class and favorable regulation. In fact, Vietnam's life insurance industry is one of the most promising in Southeast Asia, IBM noted.

According to the Association of Vietnamese Insurers, life insurance in Vietnam was estimated to grow by 18 percent with direct premiums climbing in 2012 to 18.9 trillion Viet Nam Dong (VND), which amounts to about $900 million U.S. In the meantime, the market is dominated by endowment policies only, while the share of individual and supplementary life insurance products is still very low. According to the country's Ministry of Finance, in 2013 only five out of 89 million Vietnamese people have bought life insurance, contributing less than 1 percent of the Gross Domestic Product (GDP).

Phu Hung Life aims to tap this opportunity and relies on the smart IT infrastructure as a key enabler of its strategy to meet its distributor and customer needs in Vietnam. As a new entrant in a competitive marketplace, Phu Hung Life has to pursue growth by running its core operations effectively, keeping costs under control, and enabling new business models to offer more affordable, tailored and comprehensive policies to its more than 80 million potential clients.

"As we are preparing to launch our first offerings early next year, our strategy is to establish an operating model in which technology is accessed as a flexible, variable cost service as opposed to the traditional fixed-cost approach," Bimal Balasingham, head of the board of directors for Phu Hung Life Insurance, said in a statement. "We needed an IT infrastructure that would give us enough flexibility and choice on how to reach our clients—via traditional ways or over the cloud, for example. In addition, we have to rely on the IT platform to leverage the big data we operate with in order to gain more insights into our clients' needs."

As part of the contract, IBM, together with its business partner TD South, has already delivered the first smarter infrastructure solution consisting of IBM System x and IBM Power Systems servers 720+ running IBM i operating system and IBM Tivoli Storage Manager. The virtualization technology and dynamic resource reallocation solution helps Phu Hung Life manage its hardware environment with software tools and get a system that can easily integrate core and non-core applications and manage diverse workloads.

"Phu Hung Life now has a system that supports and integrates existing and new insurance applications," said Crispin Bui, sales executive for IBM's Association of Southeast Asian Nations (ASEAN) business unit and IBM's Ho Chi Minh City (HCMC) branch manager, in a statement. "Once the new offerings launch next year, Phu Hung Life will be able to provide reliable and timely services with superior service-level agreements for its clients. In addition the company will be able to manage its future growth and reduce its total cost of ownership while gaining high reliability, availability and scalability."

Regarding growth markets, IBM reported a drop in its growth markets revenue for the third quarter of 2013.

During a call with analysts to discuss the company's third-quarter financial results, Mark Loughridge, IBM senior vice president and chief financial officer, said: "From a geographic perspective, our challenge this quarter was in growth markets—where revenue was down 9 percent, or 5 percent at constant currency. Our performance in growth markets has historically outpaced major markets by eight to 10 points, but this quarter, for the first time, the growth markets trailed the majors."