By Luanne Teoh on 09-02-2011

Within a matter of a decade, the internet space has been dominated by three main players — United States, India and China, each with its own set of strengths. While the US leads with intellectual capital, India dominates with software development and China conquers with hardware production. That’s been the way of the technology world as we know it — But all that is about to change and very quickly indeed within the next few years.

“China is slowly but surely owning the entire technology value chain (hardware, software and infrastructural services) like no other country has ever done before.  This depth of control coupled with a curated ecosystem means the winners in China’s cloud will be consolidated, behemoth players.” said Jonathan Siegel, founding partner of RightVentures and advisor to Heroku (sold to Salesforce for $212 million), Cloudkick (sold to Rackspace) and Orchestra (sold to Engine Yard).

Looks like Jonathan’s prediction has proven to be correct with Microsoft’s recent announcement on its collaboration with China Standard — Microsoft’s Chinese OS partner to develop cloud computing products for the the Chinese government. A move that will help Microsoft’s sales and entry into China’s government agencies.

According to PCWorld in 2010, “The developers of two operating systems used in China are teaming up to build a domestic OS brand that could challenge Microsoft’s dominant Windows platform. China Standard Software and the National University of Defense Technology have signed a strategic partnership to launch an operating system brand known as “NeoKylin” that will be used for national defense and all sectors of the country’s economy.”

NeoKylin is targeted at government offices, national defense, energy and other public sectors of the Chinese economy. Its aim is to reduce China’s dependence on imported operating systems and China’s domestic market of over 470 million internet users is big enough to be self-sustaining. As business in Asia are mostly conducted through long-standing personal relationships, this move by Microsoft to enter the protectionist Chinese market through its local partner represents an incredibly strategic move to start introducing itself to the Chinese government.

In 2010, Google pulled out of China due to its refusal to comply with China’s censorship laws. Within a year of Google’s departure, Microsoft announced in July 2011 it will be partnering with Baidu (China’s largest search engine) to deliver English based results to Chinese consumers. With this new announcement to develop cloud based products for the government, it definitely looks like Microsoft is planning to slay and dominate the Chinese dragon while hitting Google twice in row at its weakest point — China.

“I expect the next five years of Chinese cloud development will not only catch up, but exceed the public global cloud offers in terms of low-cost platform delivery.” said Siegel.

Here are some recent developments within the cloud computing space:

• Baidu is looking to acquire mobile and cloud computing based companies to increase its dominance within the mobile web space. While developing its own products, chief financial officer Jennifer Li said Baidu is also on the lookout for any acquisition and investment opportunities in mobile Internet and cloud computing – using remote servers hosted on the Internet to manage and store data.
• IBM is collaborating with China- based Range Technology to develop a 6.2 million square feet  “city-sized” cloud computing complex in the Hebei province in northern China. “This initiative plays a critical role in the economic development of China in light of the pressing demand for managed hosting in the areas of cloud computing and mobile devices,” said Range Technology chairman Zhou Chaonan. According to IBM, the complex is expected to employ between 60,000 and 80,000 people.
• Oracle announced recently that the Oracle Cloud Computing Solution Center has been established in Beijing. This facility will showcase the latest innovations and provide a complete solution to support the entire cloud computing technology stack including Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS).

While the economies of US and Europe are suffering a temporary setback, the high profile exits and entries into China is an indication of the still booming Chinese and Asian economy overall. The insatiable demand of China is perhaps the saving grace of US-based technology companies looking to expand internationally — either through partnerships or acquisition.

Image courtesy of Wunderground

About Luanne Teoh

Luanne is a senior correspondent for BizTechDay focused on Small Business Tech, Mobile and China based in San Francisco. In the last 17 years, she has helped launch start-ups and turned around failing operations. Her international work experience include both public and private corporations in Southeast Asia, Australia and North America. She has previously worked for Oracle Corporation, SonyBMG Music, Universal Music, Catcha Media and SOH Inc. Apart from a keen interest in technology, Luanne is also and avid explorer of the globe, cultures and people.

One Response to “China: The Dragon Is In The Cloud!”

1. Catherine Says:
   September 29th, 2011 at 10:27 am

   Interesting. Currently I’m going for BSIT in Networking. Cloud computing is really big inovation and yet so many companies can not understand how easy it will make their jobs.

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