China’s red cloud tempts U.S. service providers

service providers

The sun over Shanghai. Should U.S. cloud-service providers reach for the red cloud? Some have established a foothold in China despite the challenges. Credit: fuyu liu

U.S. cloud-service providers looking to do business in China have within their reach an underserved market with tremendous potential, but would need to overcome a series of obstacles to seize those prospects.

The risks and advantages associated with extending U.S.-based cloud services to a country with 19 percent of the world’s population is covered in a recent report from the U.S.-China Economic and Security Review Commission, which set out to characterize present business conditions and prospects for policymakers and the public.

New opportunities

The report, “Red Cloud Rising: Cloud Computing in China,” also contains plenty of insights for major tech companies that see tremendous potential in China, where analysts predict the industry’s overall value chain could grow to $163 billion by 2015.

Innovations in Chinese cloud computing have so far been led by Chinese companies, including e-commerce giant Alibaba, whose cloud-based operating system for smartphones was the first of its kind. E-commerce is a real force in China, which will likely pass the U.S. to become the world’s largest e-commerce market before the end of this year, Tech Page One reported in August.

Other innovations in cloud computing have been made by web services company Baidu, which has designed data centers that claim to use the least amount of energy.

Challenging landscape

The report stated that Microsoft and other U.S. companies are pursuing partnerships in China, though questions remain as to whether those efforts will pay off. Restrictions on foreign investment in some telecom services mean that U.S. companies must enter into joint ventures with Chinese companies to provide cloud-computing services to Chinese consumers from data centers in China.

Infrastructure challenges also exist, as most data centers aren’t as reliable or efficient as those in the United States. China also lacks the same kind of support for virtualization and core chips that’s available in the U.S.

Yet another variable is the reluctance of China’s private sector to buy cloud-computing services amid concerns over security.

Promising entry

Some U.S. companies have been able to establish a foothold in China despite these challenges, however. Microsoft, for instance, has partnered with 21Vianet to offer the Windows Azure cloud-computing platform, which was previewed by the companies in June. The success of Azure “could encourage more business customers to adopt cloud computing solutions,” the report’s authors wrote.

“Despite potential obstacles to foreign participation in the cloud computing market, it appears to improve the level of technology and services that will be offered in China,” they concluded.

Nick Clunn
Nick Clunn is a journalist covering the tech beat and an adjunct professor at Montclair State University. He lives in New Jersey, where he had worked as a staff writer for several leading daily newspapers and websites.
Nick Clunn
Nick Clunn
Tags: Technology,Virtualization