Gov't concerns remain lynchpin of China cloud space

Danni Xu/Frost & Sullivan
23 Jun 2014

The Chinese cloud services market is forecast to grow at a 40.5% CAGR for the 2013-2020 period, with the overall market hitting $4.3 billion in 2020, according to Frost & Sullivan.

In general, censorship, the need to maintain local regulatory compliance and the government’s supportive policies towards cloud computing are exposing Chinese cloud service providers to new opportunities.

The most representative domestic cloud service providers include Aliyun,, and Grand Cloud. They are coexisting with internet services companies such as Baidu, Sina and Tencent, that have launched their own cloud platforms in recent years - branded as BaiduAppEngine, SinaAppEngine and TencentAppEngine, respectively.

China Telecom, China Mobile and China Unicom were also early entrants in the cloud computing arena by taking advantage of their abundant infrastructure, large client base and significant financial support.

Another tier of market players includes traditional data center service providers such as 21 Vianet and China Entercom, which extended their current capabilities to the cloud. Besides, there are some pure SaaS providers like 800APP and XTool that are also playing a key role in the domestic cloud services market.

After global service providers’ weak play in the local cloud market for a long time, Microsoft became the first global service provider to offer onshore public cloud services in China. It revealed the partnership with 21 Vianet early in 2012 and announced the general availability of Windows Azure and Office 365 in March 2014.

Amazon and IBM followed suit by assigning local partners, which will act as an operational entity, to support the smooth delivery of their cloud services in China.

Contrastingly, Google launched facilities in Taiwan and Singapore at the end of 2013 but scrapped the plan to build a data center in Hong Kong. The reason officially cited was the cost and difficulty to find spacious land in Hong Kong, while there were speculations around the fact of its contentious isolation from mainland China, which probably led to its change in strategy for Hong Kong.

With the successional strikes at US tech by the Chinese government recently, such as banning Windows 8 from government PCs and urging banks to remove IBM servers, the future of these global cloud service providers is still fuzzy.

On one side, municipal governments are actively working with global vendors to bring in foreign investments and technology advancement. For instance, the Ningxia local government not only approved the AWS pilot project on building a large-scale data center in the region, but also intended to use Amazon’s platform to deliver e-government services.

On the other side, the central government continues to tighten the regulation of data sovereignty, which gives a broad hint on encouraging local enterprises to purchase IT products or services from domestic providers, especially for key sectors.

Global services providers need to implement smart and innovative strategies to mitigate the government’s concern. Otherwise, they may end up having to withdraw from this unique but promising market, just like Google.

Danni Xu is an industry analyst at Frost & Sullivan’s ICT Practice in Asia Pacific



Related content

Follow Telecom Asia Sport!
No Comments Yet! Be the first to share what you think!
This website uses cookies
This provides customers with a personalized experience and increases the efficiency of visiting the site, allowing us to provide the most efficient service. By using the website and accepting the terms of the policy, you consent to the use of cookies in accordance with the terms of this policy.