South Korea pushes policy for public sector to use local servers and storage

South Korea is moving to implement a policy that will have the public sector give preferential treament to local storage and server vendors over foreign counterparts starting next year to boost the market.

The Small & Medium Business Administration (SMBA), a South Korean government agency that has responsibility for small- and mid-sized enterprises, plans to have the public sector buy server and storage products from local original equipment makers (OEM) for the next three years, starting in 2016.

The SMBA will choose from 236 products that have been deemed by the OEMs to be "competitive", after a review on Thursday. When it will publish the result is not yet known.

The Ministry of Science, ICT & Future Planning (MOSIF) first drew the blueprint for the plan two years ago as it believed it needed to increase the competence of the local IT equipment market.

The government currently buys 100 billion won to 200 billion won worth of server and storage equipment annually, mostly from foreign vendors. It wants to buy from more local OEMs to increase their revenue and competence. To that end, the ministry approved the forming of the Korea Computing Industry Association (K-CIA), an alliance of local OEMs, to choose "competitive products" that will preferred in purchases. K-CIA made their first pitch to the SMBA, which must approve their list, last year. The administration refused due to lack of sufficient data on the products.

Government agencies will guarantee purchases of the competitive products chosen over foreign ones or large-sized local conglomerates.

The plan is not final, however, and the SMBA may not go through with policy after all. Local distributors of foreign OEMs have complained that they will suddenly be forced lose their clients, and would go under if the policy is implemented.

Companies such as HP, IBM, Dell, Lenovo, Cisco, and Huawei, who will lose some revenue if the policy goes through, have taken the stance that even if they lose government clients, they have more leeway in other sectors to make up for the loss, according to people familiar with the matter.

After the review by SMBA, the list will be turned over to MOSIF for a final decision.

Spokesmen for SMBA and MOSIF was unavailable for comment.