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Let me touch on just a few of the actions we've taken in this area.
First, training: As a company, we're investing $800 million every year in training and development of our employees. By the way, that's about $100 million more than we invested last year. Here in China, Henry's team has a total commitment to focusing on the skills of his people. So far this year, IBM China has conducted more than 20,000 student days in employee training.
No matter what stage of transformation are, we understand that the skills of IBM people will always be critical to our ability to compete.
Secondly, technology: Our information technology infrastructure supports our drive for speed, cycle time, as well as skill building. Our global intranet and collaborative Notes software rollout is reaching out to all of our employees, and to our customers and business partners.
As I mentioned earlier, over 350,000 people on our own internal network. It is the largest undertaking of its kind anywhere in the world, and it's all done to support institutional change, improve our ability to share knowledge and break down hierarchy.
For example, via our intranet site, we teach thousands of IBMers about new solutions and sales programs without any of the traditional physical requirements or costs associated with this kind of training.
Lotus Notes and the Internet are also central to our communications strategy. I personally use our Lotus Notes structure to reach every employee, simultaneously, any time I want, on issues of strategic importance.
These tools allow us to design virtual teams, manage them, get things done across without having people travel to meetings and lose productive time.
Finally, measurements: They are fundamental to cultural change. People must be told what is expected, and then rewarded based on the results they deliver.
We have changed our compensation systems to make sure we differentiate our top people from our average people, individuals and teams. And we've linked employee compensation directly to company performance.
But enough about IBM. I'd like to close with a personal comment on China.
China is embarking on an extraordinary new stage of its economic and industrial development. The restructuring of the state-owned enterprises is as big a transformation as any country has ever seen let alone implemented.
The process of transformation of the state-owned enterprises is well underway, as we discussed with Minister Sheng and President Jiang yesterday. Today it is working at the first stage of enterprise restructuring, which is to align industries, align assets, merge companies, and to create an industry infrastructure that is organizationally capable of becoming a globally successful enterprise or globally successful industry.
However, there's another phase to economic reform of state-owned enterprises that goes beyond structure, that goes beyond merging, that goes beyond aligning. It's about the processes by which the enterprises are managed. It goes to the kind of things I just talked about that we've been through with IBM.
Building the systems of cost control, of accounting, of inventory management, of supply chain management, of cash management, of customer relationships, and of benchmarking. These are all systems that aren't created through structural change. They're created through process and cultural change.
And underpinning all of those systems -- what drives the creation of those systems -- is information technology. Information technology is the science -- the underlying science -- of institutional restructuring. It is the science you use to restructure institutions. It is the basis and the tools by which you build systems that allow institutions to be efficient and globally competitive.
China's information technology industry needs to evolve today along with the state-owned enterprises to support the transformation of China enterprises.
Today China's information technology industry is principally a hardware based industry. But it is absolutely critical that China build a software and services industry along with its hardware industry if the transformation of the state-owned enterprises is going to take place.
Because what we need in China is applications.We already have the computers, but what China needs now are the applications that run on the computers that will allow the state-owned enterprises to achieve this transformation.
I'm not talking about simple, unsophisticated software like spreadsheets, word processing, or games. I'm talking about large, complex software that allows these companies to do all the things I talked about before: transaction processing, data management, billing, cash management, managing platforms, e-business opportunities.
China needs to build the industry that will adapt applications for abroad and build new applications out of the intellectual capital of the Chinese people.
And then a services industry has to emerge that will help China's institutions apply these technologies to their state-owned enterprises.
And finally there is, in my opinion, a very big opportunity for China to lead in the transformation of small and medium sized companies, including smaller state-owned enterprises. Because what will happen in the future is that software applications that allow companies to become efficient and globally competitive will be embedded in a network.
Small and medium sized companies will not have to build those applications. They will not have to pay for those applications. If China's telecom industry develops in the way we expect it will, and if focus is given to these Chinese applications, small and medium sized businesses will be able to, in effect, rent the applications, dial up on their telephone, and have a billing application, an accounting application, or an e-business application, to use without having to build it, pay up front, or maintain it.
But again, this requires a focus in China on the next stage of development of the information technology industry, which is to move beyond just making PCs and hardware to making intellectual capital. To making the real heart of an information technology system which is the application, not the hardware.
So it's interesting to see how China's extraordinarily important priority of restructuring the state-owned enterprises aligns very clearly and carefully with the next stage of development of the information technology industry in China. It aligns very clearly with the next phase of the information technology, which is e-business.
And through the evolution of Chinese-based applications, building on the e-business concept, there's a lot of opportunity and, I think, a lot of optimism about the success of the state-owned enterprise reformation program.
Thank you very much.
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