How The Cloud Is Moving China beyond Manufacturing

At a Glance

  • As China's economy shifts, financial services, healthcare and telecommunications are embracing the cloud.

China’s emphasis on growing its service economy, as it moves away from manufacturing as a driver, marks a new phase in the nation’s development. Currently, China imports more services than it sells to the rest of the world in the form of banking, accounting, data analysis and other white-collar service industries.

However, shifts already underway point to the growing sophistication of China’s information economy, and new services targeting its domestic economy, but also geared increasingly to the international market. This is fueling demand for data analysis and other digital applications involving cloud computing.

There are a number of incumbent service providers, but many experts believe the market for cloud-based computing is still in the early stages of adoption in the world’s second-largest economy. Professor Peng Yang is a leading researcher at UR Inc., a cloud exchange platform in China that supports the development of cloud infrastructure, software and services. The firm does business with international players including HP and Dell, and supports many companies doing business in China, including CME Group. We spoke with him about how the cloud will play a role in China’s economic transformation.

 

OpenMarkets: China has signaled its intention to move beyond manufacturing and towards a more service and consumption based economy. What role will the cloud play in facilitating this change?

Professor Peng Yang: UR Inc. believes that the next stage of China’s development should be based on an open, feature-rich, and service-oriented cloud platform, where government, industries and enterprises can innovate with rapid technology adoption. Having the broadest spectrum of stakeholders together on the cloud is a groundbreaking model to change the way cities work, businesses run, and citizens live. Ultimately, it will help China to move beyond manufacturing and towards a more service and consumption-based economy.

The cloud is seen as bolstering efficiency across different commercial sectors. What are some of the specific sectors where you expect to see rapid adoption of cloud-based services in China?

With the economic downturn, many large enterprises and industries in China are facing IT investment cuts. However, more than ever, they are eagerly looking for ways to utilize and revitalize the legacy infrastructure in order to improve operational efficiency and foster business innovation. The main sectors embracing the cloud are financial services, healthcare, telecommunications and manufacturing.

In terms of finance, traditional banks and insurance companies are facing pressure to compete with front office innovation, a faster application development model and big data analytics to predict customers’ best next action, all of which can utilize UR Inc.’s cloud development platform and big data cloud solutions.

Specifically within the China context, what are some of the ways that local governments, non-profit institutions, or community groups could benefit from cloud-based applications?

Authorities at all levels in China see a pressing importance to empower the government and citizens with new styles of IT for the benefit of the environment, economy and quality of life. It has been estimated that 10 percent of China’s total IT spending will be directly related to smart city initiatives in the next five years for smarter transportation, smarter healthcare, smarter water usage and so on.

More specifically, these include China’s smaller cities where stakeholders can share the same missions, governance, security requirements, and policies. In terms of education, many of China’s universities are supporting big data incubation labs and data centers to help regional governments innovate.

China’s ‘One Belt One Road’ initiative reflects the official policy of engagement with its regional trading partners. How will cloud-based services help meet the aspirations of the policy, in both the maritime Silk Road and the Silk Road economic Belt?

The infrastructure, business models, operational processes, and data flows of trading partners along the Silk Road economic belt are all different. That’s why UR Inc. has partnered with Hewlett Packard Enterprise (HPE) and other S&P 500 companies. We initiated an open and hybrid cloud model to connect all the dots. Traders, buyers and service providers can all benefit from the transparent and single view of resource utilization and automation regardless of where the data, application and infrastructure are hosted. This makes it easier for all the partners to engage with both small-scale, informal communities as well as large-scale, formal institutions.

There are a number of incumbent providers of cloud-based services in China, and foreign companies developing partnerships with Chinese counterparts. How will increased competition impact the cloud in China?

Under current regulations, multinational companies (MNCs) cannot directly hold licenses to operate cloud services, but they can in collaboration with local licensee partners. One model is for MNCs to provide technology to enable the cloud platform and ensure it’s up and running, while local vendors focus on the bandwidth resource, utility management and customer acquisition. Such partnerships have created tremendous opportunities both for Chinese and foreign companies such as UR Inc and HPE.

Many industries in China suffer from excess capacity. Is the cloud one of them?

In China the cloud is oversupplied already because many people have tried to enter the market. However, in reality many of these companies only provide co-location services. Overall it’s fair to say that the cloud is oversupplied, but in terms of software services on the cloud there is strong demand, and a shortage of supply.

How do you envision some of the big changes that we are likely to see 10 years from now?

I tell my mother that in the future she will be able to consult with her doctor online, and that’s a huge benefit. In Beijing, for example, it’s very hard to make appointments to see the doctor. And often when you get to see the doctor, they don’t spend enough time with you because they handle hundreds of patients every day. With big data and cloud technology, doctors will be able to spend more time assessing your medical case, and you will receive better treatment.

Where would you say is China’s version of Silicon Valley?

I think the geographic center of cloud computing is in Beijing, and that’s because internet companies are mostly based in Beijing. For foreign companies that want to do business in China involving the Internet, they need to be based in Beijing.

What’s the feeling in Beijing at the moment? Do you get a sense that there is real momentum and optimism towards the cloud?

Very much so. Every year in Beijing, we have more than 500,000 new university graduates. We have lots of young people here. The overall atmosphere is very exciting with lots of new internet companies setting up. People are getting innovative and seeking the financing to fund the companies of their dreams.

 

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