Last week, Chinese telecom giant Huawei announced its intentions to enter the cloud computing space by providing equipment for cloud data centers. This is a market vastly dominated by companies like Cisco Systems. However, Huawei’s strong customer base in China, Europe and Latin-American could help to make it a relevant player in the space. If successful, Huawei will be another example of cloud computing technology providers that have achieved relevance on specific geographic regions.
The phenomenon of regional cloud providers is certainly interesting. Globally, the platform as a service(PaaS) market have become a four-company race between Amazon, Microsoft, IBM and Google. However, players such as Alibaba in China, Dimension Data in Australia-New Zealand and a handful of other players in geographies such as Brazil, Russia, South Africa and other fast growing economies, have managed to stay incredibly competitive in those regional markets. Even more importantly, the cloud incumbents have struggled finding effective ways to compete against those regional players.
The challenges of international expansion for US tech companies are widely documented. Just a few weeks ago, car-sharing giant Uber raised the white flag by partnering with its arch-rival in China Didi. This mode was the final chapter of year of efforts by Uber trying to penetrate the Chinese market which resulted in losses of as much as $1 billion per year.
Despite the numerous examples of challenges and failures experienced by US tech companies expanding onto emerging markets, the raise of regional cloud providers remains a very unique phenomenon. Cloud platforms such as AWS or Azure are global by definition and the leaders in the space are companies with decades of experience penetrating and developing international markets. Then how is it possible that regional cloud providers can stay so competitive?
Five Reasons Why Regional Cloud Providers are Still Relevant
Regulation and Compliance
Regional cloud providers are typically very effective navigating the compliance the regulatory environment of their target geography. Different regions of the world are subjected to very particular regulations in areas such as data transfers, security, compliance policies and other artifacts that are completely foreign to US companies. As a result, the cloud platform incumbents have been forced to devote time and resources to be compliant with those requirements which has given the regional cloud providers a clear advantage in terms of time to market.
In many areas of the world, governments have intervened to favor the adoption of regional cloud providers by local companies. Some people might think about this type of intervention as anti-free market by many governments consider it the responsible thing to do. This level of goverment intervention has made it challenging for cloud incumbents to penetrate markets in which many businesses are influenced or even dependent on the goverment.
Integration with Regional Services
As we’ve seen in other technology areas, markets such as China, Southeast Asia or Brazil as sufficiently big to build large companies. Regional cloud providers such as AliCloud have done a masterful job providing support for popular local internet services in areas such as messaging, storage, games which are incredibly popular in the region but not very well known for cloud incumbents. Regional cloud providers have used this level of service as a competitive advantage to capture the local market.
Regional Developer and Partner Communities
Many of the regional cloud providers have been able to nurture substantial developer and system integrator communities within their target region. As a result, many of this cloud providers are able to onboard client faster than the cloud incumbents and have the support of a local developer community.
Patriotism, regionalisms are some of the often ignored influences in the adoption of enterprise software technologies in international markets and cloud computing is not the exception. AliCloud is a cloud platform built in China for Chinese customers. Despite the obvious gaps in capabilities between AliCloud and incumbent platforms such as AWS, Azure, Bluemix or Google Cloud Chinese enterprise customers feel better represented by adopting a Chinese cloud solution and perceive that as a support for the local tech industry.