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Friday, September 17, 2004

Power Shift From West to East -Tech's Future via Bweek

With affluent markets maturing, tech's next 1 billion customers will be Chinese, Indian, Brazilian, Thai etc.. In reaching them, the industry will be deeply transformed.During the first 50 years of the info-tech era, about 1 billion people have come to use computers, the vast majority of them in North America, Western Europe, and Japan. But those markets are maturing. Computer industry sales in the U.S. are expected to increase just 6% per year from now to 2008, according to market researcher IDC. To thrive, the industry must reach out to the next 1 billion customers. And many of those people will come not from the same old places but from far-flung frontiers in countries like India and China.
Tech companies are scrambling to cash in on what they hope will be the next great growth wave. Led by China, India, Russia, and Brazil, emerging markets are expected to see tech sales surge 11% per year over the next half decade, to $230 billion, according to IDC. What makes these markets so appealing is not just the poor, but also the growing ranks of the middle-class consumers. Already, there are 60 million in China and 200 million in India, and their numbers are growing fast. These newly wealthy consumers are showing a taste for fashionable brands and for products every bit as capable as those available to Americans, Japanese, and Germans.That tantalizing opportunity is drawing all of tech's big players. Microsoft is hawking software in Malaysia, Intel is pushing its chips in India, Cisco Systems is in Sri Lanka, and on and on. IBM says emerging markets are now a top priority. "We'll be even more aggressive," says IBM Chief Executive Samuel J. Palmisano. In Brazil, where IBM's revenues just zoomed past $1 billion, Big Blue plans on hiring 2,000 people and spending an additional $100 million on market development.

For tech's giants, this is the equivalent of America's basketball stars playing Argentina in the Olympics under international rules. The leaders are just as vulnerable to upset because they're facing companies that grew up in these markets and know them intimately. Just look to China, where homegrown Lenovo Group Ltd. has fought off Dell and other invaders to remain the top PC player. The Western powers may be accustomed to dominating in the developed world, but as the competition shifts to new terrain, their lock on the future is far from secure. They face stiff challenges from service companies in India, online gaming pioneers in Korea, security outfits in Eastern Europe, and network gearmakers in China. Even mighty Microsoft is vulnerable. Open-source software, with growing support in developing countries, could stunt its growth.The PC-centric era, dominated by U.S. companies, is fast giving way to the wireless age, where Asian enteprises are very strong.The challenges of succeeding in emerging markets are forcing the Western powers to come up with bold new strategies. They're under pressure to innovate like crazy, pioneer new ways of doing business, and outmaneuver their feisty new competitors.
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