China leading world in public cloud growth
The pandemic and digital transformation are driving break-neck growth in China's public cloud markets.
The IaaS and PaaS markets grew 47.5% and 53.9% respectively in the first half, according to IDC China. Combined they grew 48.6% year-on-year, down from 53% in the same period last year, but still the world's highest growth rate.
Alibaba Cloud is the runaway leader in both segments, with nearly two fifths of the market.
Unusually, two telecom companies rank among the frontrunners. Huawei is vying with Tencent for second place in both IaaS and PaaS, with around 11% share, while China Telecom ranks fourth in both segments.
Other players, including China Mobile, China Unicom, Baidu Smart Cloud and JD Cloud, account for around a quarter of the total between them.
IDC says both IaaS and PaaS are in a competitive stalemate, with little movement between the three leading players, Alibaba, Huawei, and Tencent, who between them account for 60% of the market.
Clouds rolling in
IDC China public cloud research manager Julia Zhuge says the market is evolving from infrastructure competition to competition in full platform capabilities. To improve competitiveness, cloud companies are investing in IaaS infrastructure, internal chip development and stronger PaaS capabilities, like data processing and cloud native services, she said.
The drivers of this growth spurt have been the pandemic and the accelerated digital transformation it has sparked. China's State Council delivered an additional boost early this year with fresh incentives on adopting cloud and new ICT to drive manufacturing and the digital economy,
"Cloud computing has become the foundation and hub of digital transformation. In this context, there is a huge demand and market space for cloud services in the government and enterprise sectors," Zhuge said.
Thick cloud overhead
Among the telcos, China Telecom has been the most aggressive. Last year it unveiled its 'cloudification and digital transformation' strategy, which puts cloud capabilities at the center of its business.
In July this year it established a dedicated cloud subsidiary, capitalized at 900 million yuan ($141 million), combining cloud operations and R&D units across the country.
Observers note that the key reason for the move was not so much to centralize operations but to attract talent. The new unit can offer much broader performance-linked incentives than the rigid compensation system at China Telecom.
China Telecom's cloud operations are included in multiple lines of business, including industry digitalization, which grew 16.8% to 50.1 billion yuan in the first half, and e-surfing cloud services, which more than doubled revenue to 14.0 billion yuan.
China Mobile revealed at its annual partner conference this week that public cloud revenue had reached 14.8 billion yuan in the first three quarters, up 118% over 2020.
- Huawei's subscale cloud unit needs more than just chips
- Next Huawei battle with the US will be fought over the cloud
- China's 5G, data center emissions double by 2035
— Robert Clark, contributing editor, special to Light Reading