FB Pixel no script6 things you need to know about China’s cloud landscape | KrASIA
MENU
KrASIA
News

6 things you need to know about China’s cloud landscape

Written by Mengyuan Ge Published on     3 mins read

Share
It isn’t difficult to envision a future where all transactions, operations, and public services in China utilize the cloud.

We all use the cloud. It’s powerful and abstract, with operations in remote data centers for us to store, access, and process data without investing in costly physical infrastructure of our own. The cloud makes all sorts of personal and business protocols possible, chief among them the capability to work from anywhere with a stable internet connection.

Several major cloud service providers are shaping this sector in China and competition is intensifying. Here are six things to know about the country’s cloud landscape.

#1: The cloud is bigger than ever

Cloud services form a sizable market in China, and it’s only picking up speed as companies of all stripes digitize their businesses and internal systems.

IDC forecasts that 55% of new enterprise applications in China will be cloud-native by the end of 2021. These applications will be developed on top of hyper-agile architecture; 10% of the environments are expected to have built-in machine learning capabilities. By 2024, 70% of China’s top 500 organizations will have implemented a multi-cloud management strategy across public and private clouds.

China’s cloud market is also intriguing because of the government’s involvement and investment in the sector. At present, cloud computing has been widely used in various government departments across the country. In 2017, the Beijing government proposed the principle of normalizing using the cloud for all aspects of business and public services. According to IDC, the Chinese government spent close to RMB 5 billion on cloud services in 2020, with a growth rate of 25% year-on-year.

A recent iResearch report suggests that China’s cloud services market—spanning IaaS, PaaS, SaaS—reached a record high of RMB 225.6 billion in 2020. It is expected to grow to a value of RMB 324.5 billion in 2021.

#2: The cloud fuels continued economic development

Throughout the COVID-19 pandemic, demand for online entertainment, web-based education, and remote work arrangements grew significantly. Consumer-facing cloud services will notch a staggering growth rate of 58.9% to reach a market value of 238.3 billion RMB in 2021, according to iResearch’s report. It’s fair to say that the world’s second largest economy (by nominal GDP) will largely be sustained by the buildout of domestic cloud infrastructure as more services move online.

#3: All cloud providers are local

Domestic and international IT companies have launched new cloud services for Chinese consumers and enterprises, but Chinese laws dictate that only local companies can own and operate cloud infrastructure in the country. Under this arrangement, Microsoft has partnered with China-based 21Vianet to run its data centers, and Beijing Sinnet Technology is the local firm that works with AWS.

#4: Chinese providers dominate the domestic cloud market

There are dozens of cloud solution providers in China, but several major players hold sway. Alibaba, Huawei, and Tencent account for three-quarters of cloud deployment in China. According to data released by IDC this week, in Q1 2021, Alibaba Cloud secured almost 40% of the market share, a 2.5% year-on-year decrease, followed by Tencent Cloud (11.4%), down 0.7% from 2020, and Huawei Cloud (10.9%), which ticked up 2.4% in the same period.

#5: Companies are pouring money into securing market share

Alibaba, Tencent, and Huawei have been heavily invested in the cloud business in recent years, but increasing regulatory setbacks for the overseas operations of Chinese companies are leading them to redirect resources to the domestic market, where competition is fierce but returns on investment are high. In June, Sina reported that Alibaba, Huawei, and Tencent have all been engaging local governments across the country to secure lucrative contracts.

Aside from lowering prices, cloud service providers entice clients by packing other resources into their service contracts, such as referral traffic and advertising. Good Future Group, one of China’s largest education groups, migrated from Alibaba Cloud to Tencent Cloud because Tencent promised advertising resources for the firm, Caijing reported. An important consideration for Pinduoduo’s adoption of Baidu Cloud is Baidu’s mobile traffic.

#6: Mid-sized and small companies are being marginalized

Most smaller cloud companies have not been able to secure their niche. Ucloud and QingCloud, for example, have suffered major losses. Ucloud’s revenue for the first six months of 2021 was USD 1.506 billion, with losses widened to USD 312 million. QingCloud’s 2021 first quarter revenue was approximately USD 114 million, with net losses to the tune of USD 61.52 million.

Cloud services are a market where the winner takes all. As the infrastructure is built out, margin costs will approach zero. But before that happens, market players have more battles to fight.

Read this: Digital asset platform Global Mofy nets investment to develop metaverse infrastructure

Share

Auto loading next article...

Loading...