EMC signed an agreement with distributor Digital China on Tuesday to establish a joint-venture company that will work with Chinese vendors to make sure their offerings are interoperable with EMC's products.
The announcement -- the first time that EMC has entered into a joint venture -- underscores the importance that the storage and software company attaches to China, and the opportunity it sees for itself in an alliance with Digital China.
"We wanted to create a magnetic force, in my words, that would draw in partners," said Steve Leonard, president of EMC Asia-Pacific and Japan. The company aims to work more closely with both software makers and hardware vendors, he said.
EMC and Digital China will each hold a 50 percent stake in the new company, called EMC DC Solutions. Financial terms of the venture were not disclosed.
"This joint venture between Digital China and EMC definitely can help EMC to expand their coverage in China," said Kitty Fok, vice president of Greater China research at IDC, calling the deal a "good move."
Digital China is already an authorized service provider for EMC hardware, and is one of China's biggest IT distributors and system integrators. It was once part of Lenovo Group, but the two companies split in 2000 and Digital China listed shares on the Hong Kong stock exchange in 2001. Parent company Legend Holdings, which is affiliated with the Chinese Academy of Sciences, retains a sizable stake in both companies.
The fast-growing Chinese market is a principal focus for EMC in Asia, and the company is working to expand its share of the storage market there. Over the last year, EMC opened four new offices in China and hired hundreds of software engineers, bringing the total number in China to more than 1,000. The company plans to open an additional five Chinese offices during the current quarter.
EMC DC Solutions will provide information-management products and services that allow locally developed applications and hardware to interoperate with EMC's storage and software offerings. These products will be marketed and sold through EMC and the company's network of resellers in China. They will not be sold outside China.
Once required for foreign companies to set up shop in China, joint ventures have lost some of their appeal in recent years as Chinese regulations and laws that govern foreign companies eased, allowing them to establish wholly owned subsidiaries. But joint ventures remain a useful tool for foreign companies to cement a close working relationship with Chinese companies.
"Joint ventures are still a good model, since it is so competitive in China," Fok said, noting that the success of companies in China ultimately depends on the strength of their sales channel.
Joint ventures can build loyalty with partners, while giving multinational vendors a way to tap the established relationships of the local partner, she sad.
Management of EMC DC Solutions will be shared by executives from EMC and Digital China.
Denis Yip, EMC's president of Greater China, will serve as chairman of EMC DC Solutions, while Yao Wu, a vice president at Digital China, will serve as general manager of the company. EMC DC Solutions will maintain offices in Beijing and Hong Kong, where the joint venture will be registered.