March 26, 2014
Microsoft is officially launching the commercial operations of its cloud offerings in China today. It’s been only nine months since Steve Ballmer, the former CEO of Microsoft, made the announcement in Shanghai that Windows Azure — now renamed Microsoft Azure — would be available for preview in the Chinese market.
I call that Episode I of the China Cloud War. In the report that I published at the time, “PaaS Market Dynamics in China, 2012 To 2017”, I made three predictions — predictions that are now being fulfilled. More global players are joining the war; customers have gotten familiar with cloud concepts and are planning hybrid cloud implementations for their businesses; and traditional IT service providers have started to transform themselves into cloud service providers.
I talked with Microsoft and Citrix last week, and I strongly believe that Episode I has ended and Episode II has just begun. In the battle for partner ecosystems and real customer business, here are the three major plots that enterprise architects and CIOs in China should watch unfold:
- The thrree kingdoms will fight with the gloves off. In my blog post last year, I described three kingdoms of global vendors in Chinese cloud market: Microsoft, Amazon, and vendors behind open source technology like OpenStack and CloudStack.
- Microsoft is leading the market as the first company in China to provide unified solutions for public cloud, private cloud, and hybrid cloud across infrastructure (IaaS) and middleware (PaaS). This builds on its deep understanding of enterprise requirements, its massive developer base, and the ease of use on the Windows platform.
- OpenStack has been doing very well in building an ecosystem via user group activities. It’s gaining momentum, with large vendors like IBM and Oracle joining the game in late 2013, and is much welcomed by companies that have a sufficient number of technical professionals with the required expertise.
- CloudStack, driven by Citrix, has been gaining customers for private cloud in the banking and financial services industries in China. It’s easier to use than OpenStack, but its marketing needs to be improved and its ecosystem needs to be further extended.
- Amazon Web Services (AWS), with the longest history in cloud and proven product technology and features, will definitely leverage its global customer base and partnership, but still has a way to before it understands local customers and establishes a partner ecosystem.
- Local market leaders will face high pressure. Local market leaders like Aliyun and Sina App Engine will be pressured both on pricing and service quality; the latter is particularly prized by large business customers. Microsoft is the first player to announce an SLA of 99.95% availability in China. In comparison, Aliyun maxes out at 99.5%. Pricing was once a major weapon of local players to attract price-sensitive Chinese customers, but the landscape has completely changed. As shown in Microsoft’s benchmark of a leading company in the soft drinks industry, the TCO of Aliyun is about RMB 500,000 compared with roughly 150,000 using Azure in a similar configuration. There are certainly other factors to consider, but local players should consider performing similar benchmarks and formulating their strategy accordingly.
- New partner ecosystems will form. Microsoft is setting the bar for partner ecosystems with its comprehensive ecosystem pyramid. On the foundation layer, 21ViaNet will continue its Azure operations. In the middle layer, Pactera will provide industrial solutions; Teamsun will more focus on smart city initiatives for government like Wuhan; and YunGoal will focus on movie, gaming and video streaming services. At the top, Yunhe Data will focus on regional cloud services, as in Henan province, while GMW.cn will provide a platform service for media.
It’s still early to say who will win the Chinese Cloud War. As Mencius, one of the most famous Chinese philosophers who lived in around 300 BC, said, “Those who win the hearts of people [i.e., customers and partners] will rule the world.”