The China Gambit

CIO Magazine

By Stephanie Overby

June 16, 2006

Last year, Steve Bandrowczak jumped at the chance to take on a new challenge: the top IT job at PC maker Lenovo Group, a Chinese company.

“I’ve rolled out systems in 200-plus countries,” says Bandrowczak, a 25-year IT veteran, describing his experiences as a globe-trotting CIO, including setting up Chinese distribution centers while head of IT for DHL Worldwide. “I’ve overseen 43 mergers. I’ve built and shut down data centers around the globe.” But now Bandrowczak is poised to tackle a job that few American CIOs would have even considered until recently: managing enterprise IT in China.

“It’s an exciting — but formidable — challenge,” says Bandrowczak. “From a career perspective, it’s the first time I’ve had the opportunity to build the center of a company’s IT capabilities in China. You only get to do something this special once in your career.”

Bandrowczak’s mission is to build a new data center and IT development center in Beijing as the primary pieces of a global IT infrastructure that will support the aspirations of Lenovo, which made its first major move abroad by acquiring IBM’s PC division last May. But managing major IT operations in China in some form or another is becoming less of a foreign concept for American CIOs.

One reason is simple supply and demand. Experts say there’s a shortage of local IT executive and management talent in China, not nearly enough to keep up with local needs in an economy that’s been growing at nearly 10 percent annually over the past two decades. Today, China has between 3,000 and 5,000 executives with experience managing in a multinational environment, according to the McKinsey Global Institute. But given the country’s global aspirations, it will need 75,000 leaders who can work effectively in global environments within the next decade. In fact, when Lenovo paid $1.75 billion for IBM’s PC unit, it made no bones about the fact that it was paying mostly for access to Western managerial know-how and best practices.

Today, having experience in China is a bonus — often the key to landing coveted CIO positions like Bandrowczak’s. Tomorrow, it may become a necessity. China is growing more and more central to the strategies of multinational corporations, both as supplier and customer. For example, China is the United States’ second-largest supplier (after Canada) and the fourth-biggest market for American goods, according to the U.S. Customs Service. “If you can show that you’ve taken an organization in massive growth mode in China and managed IT across those different cultures, that’s going to be worth a lot. You’re going to be able to get that big CIO job,” explains Steve Mullinjer, managing partner at executive search firm Heidrick & Struggles in Shanghai. “China is such an increasingly integral part of every company’s operations. In the future, if you don’t have firsthand experience, you’ll be in trouble.”

Don’t see yourself living in Shanghai? You’ll be dealing with Chinese IT in some form or another in the future, be it through outsourcing, working with suppliers or serving customers. Even if you don’t spend a week every month in a Beijing hotel as does Bandrowczak, some direct knowledge of China increasingly will be critical to your career prospects.

But for all the talk about the promise of China and its growing importance to Western corporations, the IT environment there remains a challenging one. CIOs heading to China for the first time, either out of opportunity or necessity, should understand the obstacles before they go.

Where I.T. Is Still a Service

One of the things CIOs learn about China early on is that while youth, excellent education and enthusiasm abound, experience does not. For Charlie Peters, who has overseen IT and e-business efforts in China for 15 years as senior executive vice president for Emerson, a $17.5 billion electronics manufacturer, that’s part of the thrill. “The drive of the people is unparalleled in the business world, yet their knowledge of even basic business approaches is nonexistent,” Peters says. “So it’s fulfilling to teach and experience the progress they make.”

To help meld local enthusiasm with global experience, Bandrowczak has created an IT management team made up of half U.S. professionals and half Chinese, which mirrors the makeup of Lenovo’s executive team. The Western managers bring understanding of global and enterprise IT management principles; the Chinese managers bring knowledge of local management mores. The only problem Bandrowczak foresees is that those skills he’s imparting are increasing in value in the local market. “You don’t find many companies building data centers and housing all technology and enterprise services out of China right now like we’re trying to do,” he says. “But in the future, within the next year, we’ll have a retention problem.”

Outside of the technology industry, it’s already difficult to find IT help, partly because Chinese companies don’t often place a high strategic value on IT. “In the U.S. it may be difficult to attract top talent to an internal IT department, but it’s not impossible,” says Charles Wan, who was born in Chongqing, China, but spent 15 years going to school and working in IT in the United States and became an American citizen before being tapped by Midea, a $5 billion appliance manufacturer based in Shenzhen, as its first strategic CIO. “In China, to work for the internal IT department is considered a service job. The core business is not IT. They’d rather work for a vendor.” It’s not just an image thing, says Wan; the high-tech companies pay twice as much. “I was constantly telling my CFO, these people are underpaid,” says Wan. “We need more money to get people here and get them motivated.”

Wan succeeded in getting a bigger hiring budget from HR and finance, but not quite enough to compete with the global IT vendors like SAP and Oracle. So he changed his tactic. “I decided it was better to train new grads than to try to hire them away from other firms,” says Wan. “The strategy worked, but it took time.”

Don’t expect outside help to fill the gap, either. China suffers from a dearth of local third-party systems implementation partners and local software companies. “If you’re doing a major implementation, there’s less of a resource base so your implementations are going to be more expensive and more difficult to do,” says Peters, who’s currently paying a premium to IBM China for its help with Emerson’s ERP implementations.

The Complexities of Hierarchy

While China may seem like a new frontier to Westerners, that’s not at all the way the Chinese view their business landscape. In fact, new ways of doing business threaten very old and established hierarchies. Many leaders inside Chinese companies came aboard when their enterprises were run by the state and Communist party. These men wielded tremendous amounts of authority and power in that structure. Not surprisingly, they still want to be in charge. And, as is typical in communist bureaucracies, they are accustomed to change happening at a snail’s pace. They often resist new ideas — especially when they come from outsiders.

Combating this kind of opposition was a challenge for Brennan at Asimco, which is still partnered with, invested in and connected to various state-owned enterprises in many complex ways. Brennan sought counsel from his direct report, IT services manager Bruce Li, who is overseeing Brennan’s current ERP project and serves as a cultural attach? for the interim CIO. “Bruce has fantastic English language and cultural translation skills and keeps me on the straight and narrow in terms of how I need to be perceived,” says Brennan. “I have to strike a balance between being the expert making these business units move on an issue and working collaboratively with them as a partner. I want to be authoritative and strong but I don’t want to be that overbearing, know-it-all expat.”

Li helped Brennan get the general managers of the company on board with both upgrading the company’s existing ERP system and a more problematic new business intelligence system. “We were dealing with folks from the state-owned entity side. And even though we own a majority stake in them now, the local guys can make life difficult if you don’t know how to deal with them,” says Brennan. “Bruce is pretty ingrained in the corporate culture, having been here eight years. So when it came time to ask them for access to their firewalls, or to figure out how to work with their finance resources, my approach was to talk to Bruce first. I let him go deal with the local folks and call me in at the appropriate point,” says Brennan.

And it worked — most of the time.

“You know very quickly whether you’ve grabbed the audience,” Brennan says. “Either things happen very rapidly or nothing gets done at all. There’s not a lot of middle ground.” On one occasion, Brennan saw an implementation at a local plant grind to a halt because he hadn’t spent enough time bringing plant executives on board.

Having a local second-in-command is invaluable, as Bandrowczak has also found out. His local expert in residence is actually the former CIO of Lenovo, Xiayon Wang. “She had tremendous experience and was the head architect and lead change agent at Lenovo,” says Bandrowczak, who divides his time in Beijing among the local IT team, the business heads and the local factories. Wang didn’t have the global deployment experience to continue on in the CIO role immediately following Lenovo’s acquisition of IBM’s PC division but stayed on as Bandrowczak’s lieutenant in Beijing. “She’s been extremely valuable to me,” he says.

The Final Frontier

Besides the challenges on the ground in China, there is the challenge of time and distance for those trying to maintain a link with the United States. Wan, for example, eventually left Midea, returning to the United States because the job was putting too much stress on his family relationships (see “Life in China”). But not a week goes by that he doesn’t hear about another CIO opportunity there. “I get calls from China all the time, asking me to come back,” Wan says. “The demand for qualified IT leaders over there is only going to increase.”

But the real lure of China is the unique challenge it presents to CIOs. The frontier, after all, has always called out to pioneers, promising the satisfaction and glory of triumphing over difficulties, the more exotic the better.

“Change management here in China is more complex and takes more time,” says Brennan. “You’ll definitely run into roadblocks. Some are political. Some are organizational. Others have to do with a lack of local vendors and consultants. It’s not a good environment for someone who’s easily discouraged. But if you keep at it, you’ll find the positive spirit over here.”

“What drives me personally is looking at where can I make my mark and leave something that’s very memorable,” says Bandrowczak. “If you think about the story of Lenovo, a Chinese company that’s trying to compete in a global market in an industry that’s very tough — and at the heart of its success or failure will be the enablement of IT — that’s a story that will only be told once. And that’s the job I signed up for.”