Nigel Knight has been closely watching the progress of the Singapore-listed China Aviation Oil Corp (CAO).

CAO, one of the "best governed" public companies on the Singapore stock exchange and a State-backed company with the exclusive right to import aviation oil into China, has been in the centre of a whirlwind for losing US$550 million in oil derivative trading.

In the eyes of Knight, managing partner of the Business Consulting Services (BCS) unit with IBM China, the crisis of CAO may result from ignorance of the importance of the transformation from a State-owned company to a public firm.

Becoming a public company means raising money and becoming a bright star like CAO used to be, but more importantly, it requires a company to be more efficient, transparent and better governed, so transformation is important for any businesses wishing to make an initial public offering (IPO).

That is a key message that Knight, a veteran consultant in helping companies to change in a changing time and environment, wants to convey to the Big Four State-owned banks, which have been encouraged by the Chinese Government to make IPOs and improve their quality and efficiency.

The four biggest State-owned banks the Bank of China (BOC), the China Construction Bank (CCB), the Industrial and Commercial Bank of China, and the Agricultural Bank of China, are believed to be a key link in the reform to strengthen the country's financial system, which is troubled by low efficiency, high bad debts, and weak internal governance.

IPO projects

The Chinese Government wants to use the IPO process and supervision by public investors to promote the banks to increase their competitiveness against international counterparts.

BOC and CCB were chosen for pilot programmes.

Their IPO projects may also become the biggest opportunities for Knight.

"I am hoping we will be starting to see some really significant results next year," said the newly appointed BCS head in China.

He told China Daily that BCS had won two projects from BOC and CCB this year, but he declined to give details and only said it would be helpful to win IPO transformation projects from the banks.

The BCS unit is also in preparation to provide IPO advisory to one of the two banks.

IBM launched a series of IPO transformation services earlier this month, aiming to facilitate Chinese banks to increase their competitiveness and transparency.

The services include risk management, financial transparency, IT investment and upgrading, IPO plan management and operational efficiency.

"The complexity of the transformation the banks are undergoing is enormous, but they have done the right thing to make their blueprints and start to think about where they need to go and what to do," said Knight.

He believes IBM's consulting unit is the most competitive candidate to help the banks handle such a huge and complex work.

Knight believed IBM's own experience in organizational transformation under former chairman and CEO Lou Gersterner, will also help the Chinese elephants dance.

IBM has been working with Chinese banks for about 20 years and providing hardware, software, and consulting to most major Chinese banks, so it knows their information systems and will gain efficiency in the transformation process.

Big Blue also has over 1,000 consultants in China, which is another unique advantage in handling organizational transformations for such huge organizations, which usually require hundreds of consultants.

ERP solutions

However, the IPO projects are not the only opportunities for the ambitious BCS China head.

Knight said traditional enterprise resource planning (ERP) solutions, which help companies to streamline their operations and increase efficiency with IT solutions, will be another growth engine for IBM's BCS unit.

Chuck Yuan, a senior ERP consultant in BCS, said IBM has the most complete ERP services from infrastructure optimization, to implementation and maintenance optimization.

The company's strength in its team makes it able to send as many as 50 consultants to large customers in their ERP projects, which only few companies can do.

Another focused area for BCS is business transformation outsourcing (BTO), which means companies outsource some functions to a third party and concentrate on its core competence.

Consumer products giant Procter & Gamble outsourced its human resources work to IBM in 2003, after splitting its IT service unit earlier.

Knight said BCS is in talks with three to four multinationals in China on BTO.

He pointed out that the experience of multinationals in their home countries makes their Chinese subsidiaries easier to accept the concept of BTO.

Another benefit is that when multinationals come to China, their first priority is to focus on core businesses, so they are more willing to outsource some functions.

To meet the increasing business opportunities, BCS also plans to expand the number of its employees by two to three times in five years from the current 1,000.

However, the supply of high-quality professionals in China is not enough to meet such demands from so many companies, so BCS will spend millions of dollars next year to train local employees.

It will also bring more overseas Chinese and foreign professionals to China to pass their expertise on to new local employees.