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IT spending grows as staff numbers drop

COMPANIES in China are increasing spending on information technology even as they lay off staff to cope with a business slump triggered by the global economic slowdown.

Smaller companies in particular are embracing online trading platforms, video communications systems and Web advertising as they seek to improve their cash flow. Their goal is to cut costs and improve their competitive position so they are poised to take advantage of the recovery when it starts.

"A company with real vision and innovation will adopt more IT, especially during the roughest patch," said Jack Ma, chairman of, the world's biggest online business-to-business firm.

Domestic industries, especially big enterprises dependent on exports, are still reeling from the effects of a global slump that has crippled many of their overseas buyers, according to the Ministry of Industry and Information Technology.

The combined revenue of the top 100 Chinese electronics companies was 1.12 trillion yuan (US$164.7 billion) last year, a 12 percent decrease from 2007.

Profits at Lenovo Group, Huawei Technologies and other big companies tumbled a combined 20 percent year on year, the ministry said.

Export trading volume at the China Import and Export Fair in April, China's biggest trade fair, fell 21 percent to US$13.03 billion.

Online trading, however, has managed to weather the storm by offering Chinese companies, especially the nation's 42 million enterprises classified as small to medium-sized -- an efficient way to tap into overseas markets.

E-commerce Website said online trading volume reached 1 billion yuan in the first half of this year, up 40 percent from a year earlier.

"It's an efficient way to display and sell products online," said Wang Shutong,'s chief executive. "The Internet has proven to be one of the best tools to make deals in the global financial crisis."

The best-selling products on include clothes and pet brushes, Wang said.

In the first quarter, revenue at China's B2B Website rose 9.6 percent to 1.37 billion yuan, according to iResearch Inc, a Shanghai-based IT consulting firm.

"The B2B market will further expand in China as players provide more related services, like logistics," said Chen Wen, an analyst of Beijing-based CCID Consulting. has linked up with UPS to improve logistics services, Wang said.

Cyber advertising

Online advertising will continue to surge globally despite the financial crisis, according to WPP, the world's No. 2 advertising and communications group.

Global advertising spending is forecast to drop by 4.5 percent, while online advertising is expected to grow 7 percent, said Mark Read, WPP's strategy director.

Coca-Cola, Intel, Nike, Unilever and other consumer-products companies are turning more frequently to the Internet to promote their brands and products in China, a country with more than 300 million Internet users.

During the financial crisis, Google Inc expanded its business through the AdSense service, which helps clients place advertisements on Google's partner Websites and shares income with the Website.

In the first quarter, Google China's advertising income jumped 25 percent year on year, according to Chinese media reports.

Based on Google's technology, advertisers can tailor their ads to specific industries and languages, control their ad budgets and get feedback through the "pay for click" model.

At present, Google has ties with more than 100,000 Websites in China through AdSense, including small Websites and personal blogs, according to Ann Wang, head of AdSense of Google China. "It's a win-win-win alliance as advertisers, Google and partner Websites benefit from it," she said.

Google AdSense is generating income for many small Websites that have been pinched for cash flow during the downturn.

The Shanghai E-zone Information Technology Co, a recruitment Website for graduates, earned US$200 each month after working with Google AdSense.

"It helped me get through a tough time and make decisions as an entrepreneur," said Cao Hongtao, chief executive of the Shanghai E-zone.

Video conference

Unified communications systems, including high-definition video conferencing equipment, help companies reduce overheads, especially in business travel, according to Alex Lee, general manager of Tandberg China, which provides video conference and telecommunications device and services.

"It's an efficient tool to cut costs and improve work efficiency, so it's a popular choice for firms coping with the slump," said Lee.

Phone carrier Vodafone saved about US$12 million since adopting Tandberg two years ago. Now Tandberg's systems are widely used by financial and manufacturing firms and by government departments.

Small and medium companies in China are expected to increase spending on telecommunications to improve their reach, according to Ovum, a United Kingdom-based IT consulting firm. Although such companies have felt the impact of the global economic crisis, their exposure to the resilient Chinese domestic market has softened the blow.

They are "price-sensitive" and are more likely to invest in software rather than hardware in order to avoid huge up-front capital costs, said Claudio Castelli, a senior analyst at Ovum.

Companies that recognize the importance of communications and want to keep in touch with their staff on the move are more likely to adopt new mobile applications, such as mobile e-mail, mobile-based instant messaging and mobile multimedia, according to Ovum. That presents enormous opportunities for mobile unified communications providers such as China Mobile, China Telecom and China Unicom.

Applications that meet the specific needs of a mobile workforce, such as tracking goods or vehicles, field services and sales-force automation, will also be in demand.



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