Cloud pleaser

How the silver lining to latest computing technology could turn to gold in China

Cloud computing is spreading across the world, overshadowing other information technologies. But in China it is destined to take a different form to that enveloping Europe and the US. The computing "cloud" is an abstract term representing an amorphous mass of IT applications and services that can be combined, integrated and tailored in numerous ways over the Internet and local networks to increase an organization's efficiency.

It is increasingly being applied in commercial and government systems, so far mainly in telecoms, health, education, oil and finance.

Globally, revenue from the cloud computing market is expected to grow this year by 92.3 percent to $60.7 billion (48.6 billion euros) from the previous year, a report by Beijing IT consultancy CCID Consulting said. Another research body said the market will be worth $241 billion by 2020.

In China alone, it is poised to grow at a compound annual rate of 91.5 percent, according to DatacenterDynamics, a business-to-business information provider, reaching an estimated value of $160 billion in 2015.

However, Chinese laws and regulations controlling the Internet and data processing will limit the extent of cloud computing services. That said, the government is to invest up to $154 billion by 2015 to support the development of 25 cloud computing centers, a research report by accounting company KPMG said.

The reason for the investment, the report noted, was the country's relatively immature IT infrastructure, which supports 500 million Internet users and 900 million mobile-device users. Also, many organizations have a low IT skill base and are lagging behind in adopting new technologies.

Not surprisingly, this massive investment has attracted major players such as IBM Corp, Microsoft Corp, Intel Corp and Cisco Systems Inc, as well as State-owned enterprises and private service companies.

"The limitations they impose are not only a Chinese thing - all countries and regions have specific restrictions and protections regarding security and privacy," he says. "The market has so much potential that most of those multinational companies cannot afford to ignore it. Besides, I think the Chinese government will make these regulations clearer in the future.

"Many countries are still developing standards and regulations for this market. Multinational companies must understand the rules that China wants followed."

Indeed, the multinationals are now looking for partners or are already working with local governments to localize their data centers, products and services.

IBM is contacting telecom carriers and other enterprises in China that have the relevant government licenses, and hopes to create a public cloud service by the end of the year.

Zhou Zhen'gang, senior research manager with IDC China, an IT research company, says the major cloud computing market for multinational companies in China is in infrastructure rather than services.

"The service market means providing cloud computing service for enterprises and consumers, which is still limited to local players given the restrictive laws and regulations governing cross-border data flows," Zhou says.

"According to current regulations, foreign companies cannot operate independently in China. They need a Value Added Service Provider license from the Ministry of Industry and Information Technology. Besides, they cannot have their own data centers here, and that slows down their cross-border connections."