Synergy Research released a report this week that concluded large, native Chinese companies are in firm control of the cloud and data center market in China, and will continue to be for the immediate future.
This is in stark contrast to the rest of the world where the cloud and data center markets are dominated by large US companies like AWS, Google, Microsoft, Cisco, and IBM. In China, however, large Chinese firms like Alibaba, Tencent, and China Telecom lead the way by a good margin, according to Synergy’s latest numbers.
As with the rest of the world, private data centers still dominate the market by a fair margin, but the biggest growth rates by far are in the cloud. John Dinsdale, who is chief analyst at Synergy doesn’t see this changing any time soon.
“The markets for cloud services and for data center infrastructure are truly global in nature and in all regions they are dominated by US-headquartered companies, but China stands out as the one huge exception,” Dinsdale explained in a statement.
Meanwhile, these companies are attempting to branch out beyond the Chinese market into the rest of the world. Alibaba in particular has been boldly pursuing partnerships with western firms to build its market outside of its home country.
Other market segments
When Synergy looked at CDNs, co-location facilities and data center hardware and software, the story was similar in terms of domination by Chinese companies. The data center hardware market remains the most lucrative in China, as this chart clearly illustrates.
What the chart doesn’t show is that Chinese firms account for over 80 percent of the revenue from cloud and data center services in the country. What’s more, the country boasts the second or third rankings by country in the world in terms of quarterly revenues by market category. That kind of dominance in a hyper growth market makes it very difficult for US firms to make any headway, but that doesn’t mean they won’t try.
China represents such a huge market opportunity, that the big US players and others have learned, even a small slice of the market can translate into huge revenue numbers. They need only look to Apple for an example. In spite of falling mobile market share numbers and a number 5 market position in China, the country still accounted for $8 billion in iPhone revenue in Q3.
When you look at numbers like that, you can understand why the cloud companies won’t simply walk away and give up. That 20 percent that’s left after the Chinese companies take their share could be a significant chunk of change. For now in China though, the usual cloud infrastructure suspects find themselves in the unusual position of chasing market leaders that don’t involve them.