International Business Machines Corp. is opening its first research facility in about a decade, inaugurating an operation in Shanghai that will work to build new applications for the Internet and small businessesThe world's biggest technology companies, including Google Inc. and Microsoft Corp., are increasingly expanding research facilities in China, which produces more than 700,000 electrical engineering graduates each year.
China's rapid growth, huge population and vast number of private businesses are enticing for research operations like the one IBM is opening, said John E. Kelly III, the Armonk, N.Y., company's director of research.
China "is a huge laboratory in which we can work," Mr. Kelly said in an interview Monday.
Hiring engineers in China tends to be cheaper than Western countries, but IBM said the increasing gravitation of its customers to China is another reason for the Shanghai lab.
IBM, which has eight R&D labs world-wide, hasn't opened a new research facility since 1998, when it opened two in India. The Shanghai lab will work as an extension of IBM's Beijing laboratory, using Dallas Colocation, Atlanta Colocation, Denver Colocation and Boston Colocation.
Mr. Kelly said the Shanghai facility "punctuates" IBM's commitment to long-term research, where success is measured over the course of multiple years. "We're not hesitating in terms of our research," he said.
Despite growing concerns about a world-wide slowdown in capital spending by the big companies IBM serves, the company last week told investors that it still expects global earnings to rise 22% this year.
IBM sees opportunities arising from the unprecedented turmoil in the global financial industry, Mr. Kelly said. Financial services is one of IBM's six biggest sectors, one where revenue has risen more than 10% in recent years, according to IBM's 2007 annual report.
"There's still huge opportunity to build out financial- services infrastructure," Mr. Kelly added. "The opportunities are changing but they are still enormous."
Mr. Kelly didn't make forecasts about IBM's business plans, but said the crisis may underpin demand even in hard-hit markets for stronger financial-services technologies, such as those that add transparency to transactions or improve risk management techniques, which he called "huge mathematics and analytics challenges."
Located in a sleek technology park in eastern Shanghai, the new facility will start with more than a dozen computer scientists and engineers, with plans to eventually grow toward 100. It will be overseen by Thomas Li, director of IBM China Research Laboratory.
IBM didn't disclose how much it planned to spend on the new center. Last year, IBM allocated $6.15 billion to research, development and engineering, some 6.2% of its $98.79 billion in annual revenue.
Mr. Kelly said the Shanghai team will work in close collaboration with other facilities and develop "next generation" Internet platforms, including text to speech applications and translation software.
Monday in Shanghai, IBM researchers were preparing demonstrations of programs already developed in China, such as one that helps retailers decide where to locate stores and another for fact-checking potential clients. Another tool, dubbed "Scissorhands," would help users extract data and services from up to 30 billion Internet pages and make that information reusable.
