MARKET SCENE : Boom and Bust in Moscow: The Saga of Two U.S. Firms : Business is finally good for IBM because it has the computer goods that the technology starved Soviet public wants.
After sticking it out through years of mediocre-to-bad U.S.-Soviet trade relations, IBM can finally afford to do business its own way, according to the head of its Moscow office, Burt Polishook.
Throughout the world, IBM uses community projects to market its products and hires only local nationals, Polishook explained. “IBM is known for being a citizen of the community in all the big cities of the world. But the ability to do community projects depends on the financial shape of the IBM office.”
And even though the company has been represented here for 18 years, it wasn’t until late last year that the Soviet office generated enough business for IBM to use those same techniques here.
Polishook refused to talk in figures or percentages about the growth of IBM’s business in the Soviet Union, but he made it clear that the goods his company has to offer are in huge demand.
“This country is computer starved,” he exclaimed. “Business is clearly getting better each year.”
As an illustration of how the company’s community service projects work, consider its program, several months old, of supplying computers and know-how for workshops on computer use for the disabled and in public schools. At its own expense, IBM also sent 18 Soviet computer professors to IBM’s European education center in Belgium to train them in the IBM way of teaching computer science to schoolchildren.
“The reception has been extremely positive, and we did get a contract out of it,” Polishook said. The Soviet Education Ministry signed a contract with IBM this spring to supply 13,000 computers to secondary schools across the Soviet Union.
“We got the contract because we showed that we understand the use of computers in education, and we demonstrated our capability to support the computers, not just sell them and walk away,” Polishook said.
In the last four months, IBM has also started recruiting Soviet computer specialists to help out with marketing and servicing its products. So far, the company has lined up agents in Leningrad, Kiev, Tbilisi, Dnepropetrovsk and elsewhere. These agents are the first step toward staffing IBM’s Soviet operations exclusively with Soviet nationals, following its pattern nearly everywhere else.
None of this would have been possible without an improvement in superpower relations, Polishook said.
Until recently, IBM was limited to selling small computers to Soviet clients because of restrictions set by the 17-member, U.S.-led Coordinating Committee for Multilateral Export Controls, or Cocom. But last month Cocom significantly eased its rules, and now IBM can market its main-frame computers to Soviet clients for the first time.
“What we see is great interest in the large systems from government ministries, institutes and joint ventures,” said Polishook, nattily attired in a navy-blue suit. “Business is better because we can offer more and because they want more.”
Superpower economic relations were generally lukewarm at best even during the detente years of the 1970s. Then-President Jimmy Carter ordered a virtual trade freeze after the Kremlin sent troops and tanks into Afghanistan in 1979. IBM director and chairman emeritus Thomas Watson Jr. was U.S. ambassador in Moscow during that difficult time.
“After Afghanistan, I don’t think we could sell anything,” Polishook said. But, he added, IBM is now profiting from its decision to tough it out in Moscow during those hard times.
“It really helps us,” the executive said. “We have a customer base, we know how to do business here and we’re still willing to be flexible.”
Despite the demand for computers, IBM, like most foreign firms, is limited in its sales to Soviet businesses because they lack freely convertible currencies like dollars or yen.
Until recently, for example, IBM refused to sell computers for anything but freely convertible currencies--a policy meaning that, like most foreign firms, IBM’s sales were limited by the Kremlin’s hard currency shortage. It’s still a problem, but now IBM is also bartering with Soviet clients.
Many foreign computer firms are competing for the Soviet market, but Polishook said IBM is ahead of the pack because of its name recognition. Even Soviet computers and software are designed to be IBM compatible.
Polishook said the elements are in place for a real turnaround in the Soviet economic system. “The future has never looked better here,” he said. “Both the desire for change and the understanding of what needs to change are here.
“It will take years for it to happen. You have to think of it as a point in history. If you see where they’ve come from and in what time frame they’ve done it, then you realize the right things have been happening.”
American businesses, he said, can be part of the change.
“If you start out knowing business here is not what it is in New York or Paris, and you’re committed to helping change the system--then you’re part of the solution,” he said.
