Facing a furnace blast of criticism about your franchise product back in the States? Well, go to China. At least that's what the Canton, Ohio-based Diebold (DBD) has done. The $2.6 billion company is under intense criticism over the vulnerability of its electronic voting machines—used widely in the U.S.—to hackers and ballot fraud.
A recent study by Princeton University that claims the panel door protecting the memory card on Diebold's AccuVote-TS voting machine can be opened with a hotel mini-bar key has triggered howls of outrage all over the blogosphere.
And citizen groups in California and Wisconsin have filed lawsuits to block the use of Diebold voting machines in the upcoming midterm Congressional elections. These headaches aside, Diebold President and CEO Thomas W. Swidarski can take solace in the fact that his company is on a tear right now selling ATMs to mainland Chinese banks.
MY CHINA HOME. The bad publicity in the U.S. means little in China. In this one-party, Communist-controlled society there isn't much attention paid to voting machines—whether they're reliable or not—or voting at all, for that matter.
Like many multinationals, Diebold now uses China as a major manufacturing base. It is one of five sizable worldwide production hubs that also include the U.S., Brazil, India, and Europe. After adding 50% more new capacity last year, Diebold's Shanghai operation can now produce 12,000 ATMs annually.
And with a 200-person research and development center, China is the company's highest-quality production center in the world, says Swidarski. All together, the Ohio company employs more than 800 people at its operations and joint venture in China.
MONEY IN MACHINES. As China's big commercial banks shut down many of their thousands of overstaffed branches in favor of self-service units stocked with ATMs, there is plenty of opportunity for companies such as Diebold. Throw in the fact that China has only 55 ATMs per million people—compared with maybe 600 to 800 per million people in developed countries, says the company—and the business prospects boggle the mind.
Thanks to recent big orders from the Bank of China, China Construction Bank, and the mainland's national post office which also does banking, Diebold has clawed its way to No. 1 on the mainland with a 30% market share. That is just ahead of ahead of rival NCR (NCR) and 15 or so Chinese domestic rivals. "Chinese banks are preparing to compete on a global basis," says CEO Swidarski. "They are looking at how to automate their retail operations."
So how do you persuade banks to buy your product in such a competitive environment? By promoting a reputation for service, reliability, and security…yes, you heard that right. So along with a 63-city service team and a nationwide call center out of Shanghai, Diebold says its ATM machines are equipped with a raft of special safety features, including one that prevents ATM card information skimming.
CHINESE ACQUISITION? A company demonstration of a Diebold Opteva ATM shows how the machine also validates money, to ensure that fake bills are not accepted, a common problem in China. "Our ATMs are recognized by [Chinese] banks as the most secure in the industry," brags Daniel Hu, Diebold's managing director, Greater China area.
Already, China has become one of the company's most important markets. Diebold is expecting 20% to 30% growth in ATM sales over the next few years and has a goal to reach $1 billion in Chinese sales in 7 to 10 years. Asia now is a $300 million market, with China by far the largest and fastest-growing country in the region, Diebold's Swidarski says, declining to break out actual mainland sales. "We expect huge growth here," he says in an interview at the company's office in central Beijing's posh Oriental Plaza complex.
The next big move on the mainland is likely to involve the acquisition of a Chinese security company, says Swidarski. That will help Diebold expand even more on the mainland by selling the complete security systems including vaults, safes, and cameras for banks, companies, government offices, as well as China's proliferating office and residential buildings.
LESS SCRUTINY. And although this area makes up almost a third of Diebold's worldwide business (one out of three commercial high-rise buildings in New York City uses Diebold security, says Swidarski), it still is a largely undeveloped business for the company in China.
"Look at all the airports and factories going up in China. They all require sophisticated security," Swidarski says. Diebold can use its expertise to help customers "secure the perimeter and interior of a site," explains the CEO. With a growing public clamor in the U.S. questioning the company's ability to provide a similar guarantee in the voting booths at home, it's no surprise Diebold is focused on chasing the China banking market.
And it's a safe bet that Beijing won't be asking Diebold to provide its product for Chinese elections any time soon—nor will Beijing raise the same tough questions about reliability and security now being raised against Diebold's electronic voting machines at home.
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