Kyndryl To Separate Its China Business: Report

Concerns with the business environment for Western companies in China and changing data laws in that country have caused Kyndryl, the world’s largest IT infrastructure services provider, to consider splitting its China business, according to a new report.

Global IT managed services provider Kyndryl is considering splitting its China business into a separate entity in response to geopolitical issues and China’s changing data laws.

The Financial Times Thursday reported that the New York-based IBM spin-off has already told some of its employees about the pending change, citing three unnamed people with knowledge of the situation.

The move would impact about 6,000 people in China and Hong Kong, the Financial Times reported.

[Related: Kyndryl CEO Martin Schroeter: We Are Exiting The Influence Of IBM]

Kyndryl, which before its late 2021 spinout from IBM served as that company’s managed infrastructure services business, is currently the world’s largest IT infrastructure services provider, with fiscal 2023 revenue of $17.03 billion, down from last year’s $18.32 billion

Kyndryl, which does business in China via its Kyndryl (China) Information Technology Company Limited subsidiary, does not break out China revenue separately.

However, for fiscal year 2023, which ended March 23, the company reported revenue of $3.84 billion in its “strategic markets,” which includes operations in countries other than the U.S., Japan, Australia, New Zealand, Canada, France, Germany, India, Italy, Spain, Portugal, the U.K., and Ireland. That was down slightly over fiscal year 2022’s revenue of $3.87 billion.

A Kyndryl spokesperson responded to a CRN request for further information via email, saying, “Kyndryl does not comment on rumors or speculation.”

It is becoming increasingly difficult for Western companies to do business in China as the Chinese government is asking its businesses to cut back on foreign help with their IT infrastructures and U.S. businesses looking to decrease the work China-based employees do for U.S. projects, particularly in relation to AI, The Financial Times reported.

Kyndryl has “been finding it very hard to [operate] as a US corporate in the data and technology space in China,” one of the people who talked to The Financial Times was quoted as saying.

Other companies are seeing those geopolitical issues with China.

Dell earlier this year reportedly made plans to stop using semiconductor chips made in China by 2024 over growing fears that political relations between the U.S. and China may worsen.

China-based Huawei, the world’s largest networking company with major market shares in servers, storage, mobile phones, and more, has virtually no U.S. market given U.S. government restrictions on the use of Huawei technology over that company’s alleged ties to the Chinese government.

Wade Millward contributed to this article.