China’s growing cloud industry

China’s cloud computing market is estimated to reach US$31.6bn in the next three years, thanks to investment from public and private players

21 May 2012 by Penny Jones - DatacenterDynamics

China’s growing cloud industry
China's cloud computing industry is preparing for growth

Cloud computing is emerging as one of the China’s fastest growing industries. The nation may account for less than 3% of global cloud computing market share – valued at US$90bn in 2011) but it is growing with an annual rate of 40%, according to analyst firm Gartner.

According to the Cloud Computing Strategy Research Report released by CCID Consulting, China’s cloud computing market is estimated to grow from about 16.7bn CNY (US$2.62bn) in 2010 to 117.4bn CNY (US$18.6bn) in 2013, with a compound annual growth rate of 91.5%. And by 2015, the Internet Society of China predicts it will have reached 1trn CNY.

Much of this growth will be pushed by the governments of China. Take the ‘China Cloud’ for example. This National Cloud Computing Industry Development Plan was recently approved by the State Council and should be released this month. It covers a wide range of cloud strategies, including a development strategy, key tasks, technology roadmap, supporting systems for China’s cloud computing industry during the 12th Five-Year Period (2011 to 2015).

The Ministry of Industry and Information Technology, along with other national departments have also announced instructions on developing innovative cloud computing services through pilot and demonstration projects in the second half of 2010. Five cities including Beijing, Shanghai, Shenzhen, Hangzhou and Wuxi were listed as pioneering regions for developing cloud computing services.

In another push for the industry, China approved the National Financial Support Program for Cloud Computing Demonstration Projects. Under this, a maximum of 1.5bn CNY will be allocated to 12 key projects from the first five cloud computing cities. The country is aiming to develop about ten cloud computing demonstration enterprises in the next three years as part of this program, each with more than 10m users with annual revenue of more than 5bn CNY. This is expected to make China’s cloud computing market worth 200bn CNY.

China’s cloud leaders
According to CCDIC Consulting, cloud computing technology in China will be used first by the government, telecommunications, education, medical, finance, petroleum and petrochemical and electricity sectors. But it is the public sector getting the first real big push. Cloud computing based e-government systems are seen as an important enabler for the public sector, helping with workplace efficiency and providing better services to citizens. As the strategic direction for e-government development by the Chinese Government, cloud computing has witnessed rapid development in recent years. There are some key projects that demonstrate how cloud computing is being used by China’s public sector.

In March 2011, the Health Cloud System of Shibei Hospital in the Zhabei District, Shanghai, was put into use after six months of testing and application migration. This was the first health cloud for China. In May 2011, the Qingao Municipal Government announced its plans to build a private cloud computing platform for E-government affairs, the first of its kind for China’s public sector. And in July 2011, the High-tech District of Xi’an City declared its Dual Cloud Deployment Strategy and the Xi’an Software Park built the first cloud computing center in Northwest China for providing Infrastructure-as-a-Service (IaaS) for enterprises and companies within the park.

According to CCW Research, IT investment by China’s public sector is expected to grow from 46.4 bn CNY in 2011 to 50.29bn CNY in 2012.

Cloud and Chinese telcos

The three state-owned telecommunication players - China Telecom, China Unicom and China Mobile - are also large promoters of China’s cloud computing strategy. With large data center footprints, unique cable/wireless network access capability and large customer base and channels, they have a lot to benefit from by offering cloud services.

In recent times, each major telco has been trying to get a competitive advantage in the cloud computing market, from data center construction to cloud management platforms. This has resulted in services being offered including cloud hosting, cloud storage and elastic computing.

All three players deployed cloud computing data centers in Chengdu at the beginning of this year. China Telecom spent the most on its facility, followed by China Unicom and China Mobile.

China Telecom is the strongest operator in China in terms of data centers and network infrastructure and has established a cloud computing company for managing its cloud computing business in China. It initiated its Tianyi Cloud Computing Program in 2009, which led to projects in six pilot cities including Shanghai, Guangzhou and Sichuan.

China Telecom President and COO Yang Jie said the company now plans to build a cloud computing data center in Inner Mongolia, which is likely to become the largest in China. He said China Telecom will also offer Internet Data Center (IDC) and Content Delivery Network (CDN) services as well as cloud hosting and storage services.

IT players are also in the mix

IT companies are also important to China’s cloud computing strategy. According to China Internet Weekly, Baidu - the largest Chinese search engine - and Ali Cloud Computing - the subsidiary of Alibaba Group (China’s largest B2B internet company) – are the most likely candidates for China’s largest private cloud players. Baidu’s focus is on cloud computing applications, whereas Ali’s Cloud prioritizes infrastructure and technologies.

Baidu has large green data center clusters in China. Its cloud computing services including massive data storage and processing, high-performance and real-time computing and high-availability service platforms. It is also the first company to open up cloud computing services free for users within the industry.

According to the Information Times, Baidu has participated in developing China’s cloud computing standards as a member of Cloud Computing Standard Committee of Ministry of Industry and Information Technology. It is also working with the Ministry of Science and Technology on two special cloud R&D projects looking at the network operating system and internet language translation systems.

Ali Cloud has also been an early adopter of cloud. In April 2009, it established the first E-business cloud computing data center in Nanjing with 100m CNY, which was planned to serve many cities across the Yangtze River Delta.

“By collecting and analyzing information and data of commodities, credit systems, payment tools and IM user resources, Ali Cloud Computing can create enormous commercial value. We will build more similar cloud computing centers in the future,” former senior VP of Alibaba Group Wang Tao said at the time.

Ali Cloud has also been rolling out various cloud computing services. In February 2012, it brought online its first service cloud email box from basic cloud platform, followed closely by the launch of its cloud storage business. In April, Ali Cloud launched the new generation cloud smart phone W806 together with another partner.

Multinationals enter the mix
China’s growing cloud computing industry has also attracted attention from multinational companies. PC chip manufacturing giant Intel, for example, recently announced that it would invest more than 10m CNY to Beijing ZZNode Technology Co, a telecommunications and IT operations management products and solutions provider. Intel said the investment was based on its recognition of the radical changes that cloud computing may bring to China’s industry. During this transition process, Intel will focus on building software and service ecological systems.

Two large cloud computing players in China and America have also signed a strategic cooperation agreement in Shanghai. According to the agreement, the 32nd institute of China Electronics Technology Group and American Eucalyptus Systems will jointly establish a laboratory for developing key cloud computing technologies and products.

The benefits for China
Internet-based cloud computing technology is being used to enhance the resource efficiency of various sectors, which will ultimately contribute to a more efficient society. Mr. Yang from Ministry of Industry and Information Technology, points out that cloud computing is estimated to be applied to more sectors in future. But China has some challenges to face in regards to its growing cloud industry. According to Microsoft Global Senior VP Zhang Yaqin, still has to consider who is going to build its cloud infrastructure, it has to ensure the reliability and security of its cloud computing platforms and ensure its interoperability, unification of data formats and standards, and the portability of information and applications along with other challenges based on infrastructure deployment.



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