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China's Cloud Positioning and the Prospect of Foreign Outsourcing


China has borne less of the brunt of economic recession than we have felt here in the States. In a position to invest capital into the future of their country, one of the major arenas they intend to dominate is cloud computing. This should come as little surprise as spending on transition to cloud computing continues to rise in the most technologically advanced countries.

Chinese dragonAccording to Forbes contributor Mark P. Mills, "The cloud is the fastest growing infrastructure on the planet. Every sector of the world's economy is migrating to it, from entertainment to medicine."

Clear Intent

The Beijing Super Cloud Computing Data Center recently wrapped up construction of its infrastructure and is expected to be ready for commercial use in June this year. Large datacenter projects aimed at cloud computing are underway all around China, including the Range International Information Hub which is expected to be the largest datacenter in the world when completed in 2016.

While these datacenters will serve some internal cloud computing demands, China's cloud computing infrastructure is growing much faster than its internet services. This clearly indicates intent to outsource China's resources, since cloud computing is only as good as the connection to it. At the same time, China has taken a more conservative approach to the cloud for its own uses, often favoring the hybrid model while being aware of the cloud-hungry tendencies of western businesses. IBM, Dell, and HP have already been investing in the Chinese cloud.

Also, while the west struggles with lowering IT costs, China ramps up its IT spending. Outsourcing of cloud resources may not be the extent of China's initiative. In late 2012, VanceInfo and hiSoft announced a merger that could spearhead China's IT, software development, and Business Process Outsourcing (BPO) efforts.

Software development is expected to take place almost solely in the cloud in coming years, so it would not be surprising for China make a power play in this area. The business application market will likely be saturated thanks to cloud computing. If the VanceInfo/hiSoft merger is indication of a trend, China could end up offering viable options for everything from application performance management software to shopping cart software.

The Outsourcing Advantage

When it comes to outsourcing, the victors are those who can do something most efficiently at the lowest cost. In terms of cost and energy, the demands of cloud computing are largely placed on the datacenter. Though it may be argued that China is in a better position due to a high number of engineers, often overlooked is the issue of energy.

The cost and availability of energy are the top concern for datacenters, which means that it is most favorable to locate them in cold climates as they generate enough heat to make external cooling sources necessary. Coal and Nuclear energy are also more favorable for datacenters because of their reliability. China has already taken advantage of both these cost-cutting opportunities. Aside from locating datacenters in cold climates, they also have a new electric grid to rival that of the US and it is largely coal based.

The Takeaway

Cloud computing being relatively young in terms of the grand dreams that have been imagined for it, we have yet to see where the best ROI will take place globally. China's success could very well lead to more capital flow from the US. However, with China appearing to have invested more deeply in cloud computing than other countries, keeping an eye on how things go for them may at least help other contenders navigate the path whether they take advantage of China's resources or not.

About the Author

Arthur Nichols is a Systems Analyst with a passion for writing. His interest in computers began when Deep Blue beat Garry Kasparov in a regulation chess tournament. When Arthur isn't drawing up diagrams and flow charts, he writes for BMC, leading supplier of application deployment software.

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