Serve cloud system management in China as a foreign company

China Paradigms interviewed Steve Mushero, the CTO of YunChang Technology, to discuss China’s cloud industry and how does YunChang provide services about cloud system management in China.

Steve Mushero started his career in internet and technology in the early 90s and founded ChinaNetCloud in 2008, at that time becoming the first provider in cloud system management in China. He has experienced the birth and rapid growth of China’s cloud industry and will guide us in exploring its development.

Cloud technology in China

The size of China’s cloud computing market has increased dramatically from 9.7 to 84.3 billion RMB in the past 5 years, consisting of three main business models: Software as a Services (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) (Know more about Cloud Computing in China).

According to Steve Mushero, the cloud industry can be separated into the customers part and corporate part. Cloud for customers mainly focuses on dropbox and backups, while the cloud for the enterprise side helps companies to virtualize physical servers. Therefore, companies can share servers and computers online.

“Cloud technology in China enables companies to build things in dynamic ways quickly. It helps to lower the cost and make work more flexible. Ten years ago, it was zero but now it’s a 100 billion RMB business”

China’s cloud computing market
Source: Statista, China’s cloud computing market size 2015-2021

Chinese cloud infrastructure market

Chinese cloud infrastructure market is at the base of China’s cloud industry and it’s becoming increasing rapidly as well. According to the South China Morning Post, Alibaba Group Holding maintains its leading position in the cloud computing market with a 43% market share. The competition is fierce among other local companies such as Alibaba, Tencent, and Baidu. Interestingly, AWS which was the only foreign company on the list holds a considerable portion of the market (around 8.2%). Canalys Expert on cloud system management in China, Steve stated that the growth of Chinese cloud infrastructure is stimulated by demand for Artificial intelligence. When discussing the influence of AI on society and business, Steve also expressed his positive attitude towards AI.

“AI can increase efficiency and create more jobs, the important thing is how we leverage AI and how we re-train people, transfer the workforce, and give them hope.”

Cloud system management in China: how to deal with complicated regulations

YunChang plays the role of a bridge between cloud servers’ providers and companies. It offers cloud management services in China, including design, build, and operate on the cloud for companies. YunChang is responsible for running, monitoring, securing all stuff related to cloud servers. To be more specific, most cloud companies that are doing cloud system management in China partner with big players (Tencent, Alibaba, and AWS) and sell their products to companies who need cloud services. After that, they help with managing the cloud. Steve gave a straightforward example to explain this service:

“It’s like a car business, big players sold you the car (servers) and then we drive it for you.”

cloud system management in China

Cloud industry in China is a very local business, meaning that it may have some barriers for foreign companies. For example, data centres in China are not connected internationally and this will have an impact on efficiency and convenience. Moreover, as a cloud management service provider in China, Steve shared with us how they deal with the restricted regulations. YunChang used a third party to provide servers and they provide cloud system management in China. As a consequence, clients need to sign separate contracts with the service provider (YunChang) and the server provider (the third party). To better meet the requirements of regulations, localization is one of the key methods for developing cloud services in China. Companies such as Microsoft started to be more local by cooperating with local partners.

Challenges for China’s cloud industry

COVID-19 has hurt the cloud industry indirectly. With the exception of E-commerce and gaming, almost all other industries suffered during the lockdown and it’s difficult for them to get back to pre-Covid levels. As a result, clients especially start-ups, have a limited budget to invest in cloud services or even cannot afford the expenses on the cloud. Cloud companies like YunChang need to be careful about cash flow and control their costs to get  through this darkest of hours. However, COVID-19 can also be a catalyst for cloud servers as companies start to realize the importance of digital transformation and will consider cloud services when they have resources to invest.

Steve also gave the possible reasons why China’s cloud industry is still less developed compared with the West. Based on his observation, they are more historical reasons which have become challenges for China’s cloud industry. The adoption rate of software in China is lower than in the West. Some Chinese companies don’t see the value of adopting cloud system management in China as they prefer short-term pay-offs and have overriding reasons which prevent them from using the efficient tools that software and cloud systems can provide. Building awareness for new technology is a long process but China is catching up quickly. Moreover, Steve confirmed the promising utilization of mini-programs or apps in China’s business, having a positive impact on the cloud industry.

“You may see this lightweight, very mobile, very interactive, but also innovative and flexible stuff come in as a new layer. So, they replace the things that didn’t work.”

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