Strategic Alliances and the Battle for the Chinese Cloud

China is one of the battlegrounds of the modern could computing markets. From US incumbents trying to penetrate the Chinese market to local cloud companies becoming more relevant at an international scale, the battle for the China cloud market is nothing short of fascinating.

A few das ago, IBM announced a partnership with Wanda Group to bring IBM cloud services to China. The partnership presented some important clues about the strategies to developed the Chinese cloud market. Today, I would like t o present a few speculative ideas about other strategic models that we might seen in the near future.

A Picture of the China Cloud Market

For years, the Chinese Cloud market can be described as a constant friction between US and Chinese companies. While US cloud incumbents have struggled to make inroads in China, a new generation of Chinese cloud companies have been steadily gaining traction in the local market. At the same token, most Chinese cloud vendors have struggled to gain any relevant traction internationally.

Currently, Alibaba Cloud (also known as Aliyun) dominates the cloud market in China and is growing at an incredibly fast pace ( see my previous article about Aliyun). Other companies such as Huawei an China Telecom have also produced relevant offers in the space. In addition to Alibaba, the other dominant forces of the China software market: Baidu, Xiaomi and Tencent haven’t been that active in the cloud platform space.

Knowing the current context of the China cloud market, we can start speculating about some potential strategic alliances that might make sense in the near future.

The IBM-Wanda Deal

As mentioned before, last week IBM announced a partnership with Wanda Group to provide its cloud services in China. The cloud infrastructure will be delivered as part of Wanda cloud data centers. The partnership will form a new entity called Wanda Cloud Company that will share its revenue with IBM.

The partnership represents the cornerstone of IBM’s cloud strategy in China and certainly an important milestone for the Chinese cloud market. We should expect that this agreement could trigger similar moves by IBM’s competitors.

A Google Cloud — Aliyun Partnership

In a previous article about Aliyun,I speculated about a potential Google-Alibaba alliance to dominate the Chinese cloud market while also expanding Aliyun’s presence in the US. Currently, Google Cloud desperately needs to establish a solid presence in China in order to keep up with competitors such as Amazon and Microsoft as well as to better support the cloud operations of some high profile customers such as Snap. A potential partnership with Google Cloud could also drastically expand Aliyun’s technical capabilities to make it more competitive with Azure and AWS and it will help to expand its presence and traction in the US market. As I mentioned before, the idea is highly speculative at this point.

Amazon and Microsoft Go an on Cloud Acquisition Spree

AWS and Azure have been able to establish a successful presence in China but its share of the market remains relatively small. To shift that balance, we can expect Microsoft and Amazon to expand its footprint in China by acquiring popular Chinese cloud services startups and rolled into Azure and AWS respective offerings. Similarly, Microsoft and Amazon could explore strategic alliances with some of other moving forced in the China software market such as Baidu, Tencent and Xiaomi.

CEO of IntoTheBlock, Chief Scientist at Invector Labs, I write The Sequence Newsletter, Guest lecturer at Columbia University, Angel Investor, Author, Speaker.

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