Global Observer

Beijing hopes to dominate cloud computing with "Cloud Valley"

Beijing hopes to dominate cloud computing with "Cloud Valley"

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BEIJING -- Beijing's government is pouring money into cloud computing, but can they attract foreign investors?

BEIJING -- American firms like Amazon and Google may have pioneered cloud computing, but Beijing’s city government hopes the industry will head east. So they built “Cloud Valley,” an angular 7,800 square meter complex in southern Beijing as a base for the industry.

Cloud computing, familiar from web applications like Google Docs, allows data and software to be stored on remote servers instead of personal computers. China’s government is pouring money into the sector, which will receive a major slice of the 2 trillion RMB it will invest in IT over the next five years. The country’s cloud computing market is expected to grow by 30% this year, according to research firm IDC.

Cities across China are rushing to set up cloud computing bases, with Shanghai, Shenzhen and even a city in Inner Mongolia getting in on the action (the freezing steppe temperatures are said to be ideal for running cloud servers). But Beijing has some of the most ambitious plans, planning to create 50,000 cloud computing jobs in the city by 2015.

Beijing’s government paid for Cloud Valley’s construction, and provides cheap office space and tax breaks to the Valley’s 13 firms, which employ around 1000 people, and have received over 1000 orders for cloud servers, according to local media.

Cloud Valley currently hosts 13 firms, which employ over 1000 people.

One of these firms, Supercloud, has designed cloud computing systems for some of China’s biggest companies, including Chinese ebay-equivalent Taobao, and China Mobile. The firms mix of industry connections, government contacts and imported technology stem from its investors, who include Chinese internet entrepreneur Edward Tian, Californian server manufacturer Super Micro, as well as the Beijing Government.

Chinese firms have different attitudes towards cloud computing than their American counterparts. In the US, the majority of firms use public cloud servers, which means handing over control of the cloud to another firm. But Chinese firms prefer to set up their own private cloud networks. “Chinese firms want to keep control,” Eric Dong, head of product marketing for Supercloud, said, “because there isn’t the same degree of trust between companies as there is in the US.” That means that Cloud Valley’s firms are usually limited to designing cloud computing servers and software, rather than running their own data centers.

Cloud Valley’s glass-walled offices are painted a benevolent shade of green, a sign of Valley’s environmental aspirations. Chinese data centers have an average PUE (Power Usage Effectiveness) ratio of about 2.5, meaning they use about half as efficient as centers run by Microsoft and Google, according to Dong. “A lot of power is being wasted,” he said. The firm claims that the servers it provided to Taobao were 80% more efficient than their previous models, and is developing servers which can operate at higher-temperatures, along the lines of the fresh-air "Free Cooling" system developed at Facebook's data centers.

Cloud Valley's firms aren’t content with serving the growing Chinese market, but hope to provide outsourcing services to foreign IT companies. "We are already marketing our services in Hong Kong and South East Asia,” Dong said. “Our major advantage is price,” he said. “But we also have a pool of software talent here.” Many of Cloud Valley’s engineers have returned to China after working for IT firms and universities in the US and Europe, and Supercloud’s CEO studied computing in California.

The Valley has managed to attract foreign firms, including Taiwan’s Chungwha Telecom, and most recently US firm Nexenta Systems. But one obstacle preventing foreign companies from setting up cloud computing bases in China is the country’s “Great Firewall,” an internet censorship system which is widely credited with slowing down internet traffic in the country. To counter this problem, direct connection to foreign servers, without going through Chinese ISPs, is already available as part of Shanghai’s “Cloud Sea” cloud computing center, Dong said.

Beijing’s government is also allowing selected companies to circumvent the Great Firewall. “You can apply to the Beijing government for permission to set up a direct internet connection,” Wen-Show Yang, Vice President of Chungwha Telecom, said. “But you need to pay a bit extra."

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Tom Hancock

Correspondent (Beijing)

Correspondent, Beijing Tom Hancock has written for Geographical Magazine, The Asia Society, China Dialogue and AsianCorrespondent.com. He previously worked at CNN's Beijing bureau. He holds a degree from the University of Cambridge and studied at The Renmin University of China. He is based in Beijing, China. Follow him on Twitter. Disclosure