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Alibaba defends cloud leadership

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  • China’s public cloud market was still fairly fragmented in 2015. However, since cloud services is a “winner takes all” market as marginal costs fall with infrastructure gains, market consolidation followed: by 2021, smaller cloud companies have been unable to defend their niche. China Telecom also dropped out of the game against other tech giants.​
  • Alibaba, Tencent, and Huawei are currently leading the market. Foreign firms have partnered with local companies to provide services: Microsoft works with 21Vianet to run data centers, AWS joined with Beijing Sinnet Technology to franchise its services. ​
  • The Comprehensive Agreement for Investment has previously promised to open up China’s cloud market for European players, but the agreement is now frozen. ​
  • As manufacturers and SMEs digitize, following the policy push of the 14th Five-Year Plan for Digitalization, strong growth in public cloud usage can be expected. Some forecasts see a market size of 56.3bn USD by 2023.​
  • However, the Chinese cloud market is still at a nascent stage of application. SMEs in China will require more business process digitalization in order for cloud usage to take off.​
  • Challenges include security concerns and China’s cybersecurity regulatory framework, which requires careful selection of critical network providers for SOEs.
  • This has led to a preference for private clouds, which is a cloud dedicated solely to a single organization. Particularly Critical Information Infrastructure Operators (CIIOs), such as China National Petroleum Corporation, often favor this option.​
  • Companies in China also increasingly prefer local cloud providers as geopolitical concerns and uncertainties shift customer choices away from foreign providers.​

Sinolytics is a European consulting and analysis company specializing in China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.

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