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China’s Pragmatic Path to Cloud Computing
Allan E. Alter, Yali Peng, Lin Runhua and Jeanne G. Harris
May 2010
Research Report
China’s Pragmatic Path to Cloud Computing
2 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
Cloud computing is coming to China.
It may not be coming quite as fast as it is to other parts of the
world, owing especially to China’s cautious, pragmatic approach
to this new technology. But the Chinese are likely to make up
for any lag time quickly. This report reveals how Chinese executives
are viewing cloud computing, and suggests how business decision
makers, IT leaders and cloud service providers should move forward
in China with this promising but largely untapped approach
to computing.
While the challenges and risks are real, cloud computing also
has the potential not only to cut IT costs dramatically but even
to transform how business is conducted.
Facilities that allow people to obtain
computing capabilities from remote
s
ervers over the Internet—“the cloud”—
are or will soon be open in Beijing,
Guangdong, Hong Kong, Chengdu,
Hangzhou and Wuxi.
1
China Mobile,
Alibaba and Lenovo, along with major
foreign companies like Microsoft
and IBM, are offering consumer and
business cloud services in China.
2
Chinese organizations are beginning
to explore and experiment with cloud
computing technology and cloud
services. In our survey of senior IT
executives, primarily at large Chinese
businesses and government organiza-
tions, we have found that 43 percent
are testing or using cloud computing in
at least a limited way, and 88 percent
will be in two years. (For a more
complete definition of cloud computing,
see “What is cloud computing?”)
In China as in other parts of the
world, executives have mixed feelings
of confusion and eagerness, hype and
skepticism about the advent of cloud
computing. While many are excited
about the potential of this new tech-
nology, others are still trying to figure
out what exactly cloud computing is,
how to exploit the technology, and
how much it really costs. (For a
look at some of the possible benefits,
see “Cloud computing’s potential.”)
Given the unknowns and risks of
this technology, caution is warranted.
B
ut Chinese IT executives are especially
cautious so far: we found Chinese
organizations are adopting cloud
computing at a slower pace than
organizations in other nations.
China is certainly capable of quickly
learning and adopting new technologies
when conditions are right. China has
become the world’s largest user of
the Internet (384 million people) and
mobile phones (703 million). Eighty-
eight million Chinese shopped online
in 2009, spending an estimated 250
billion RMB (US$ 37 billion).
3
But several
unique aspects of China’s situation are
preventing interest in cloud computing
from becoming action.
In-depth knowledge of cloud computing
remains relatively rare among Chinese
executives compared to other nations
in our survey. Chinese executives also
show less interest so far in exploiting
cloud computing’s potential for inno-
vation and process improvement than
their counterparts in other nations.
Chinese respondents look to their
government to set the rules for cloud
users and providers, especially pertaining
to cloud security and reliability. Two-
thirds believe cloud computing has
national security ramifications. As
one respondent wrote, “The safety of
data is not guaranteed. Data related to
the country’s safety should be treated
carefully.” Until the government clarifies
China’s Pragmatic Path to Cloud Computing
3 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
regulations on cloud computing and
data privacy, most Chinese organizations
w
ill remain cautious.
The fundamental technical requirements
for effective cloud computing are not
fully in place in China. Cloud applica-
tions run sluggishly unless they operate
over high-speed networks. While
broadband technology is widespread
in China, speeds remain low compared
to other nations.
4
And compared to
foreign companies, Chinese organizations
are slower to adopt server virtualization,
a computing technique that enables
software to run on any available server
in a network, and one of the founda-
tional technologies of cloud computing.
What must large Chinese companies
do to take optimal advantage of cloud
computing technology and services
in as timely a way as possible? As one
of our respondents said, “the adoption
of cloud computing needs the
joint efforts of companies, [service]
providers, IT vendors and consultants.”
IT decision makers should become well
informed about cloud computing, its
r
equirements, and potential benefits.
It is up to them to shape Chinese
perceptions about cloud computing,
and to guide their organizations in
prudently using the technology.
Business and technology leaders must
encourage state authorities to put
cloud computing at the top of the
technology agenda. Without state
support and regulation, Chinese orga-
nizations will not get far with cloud
computing.
The IT and consulting industries must
develop a market within China of
trusted cloud computing services. This
will require the support and engagement
of its customers and the government.
CIOs, business executives, consultants
and state overseers should continually
explore the potential of cloud com-
puting. Over time, innovative new
cloud services can be used to transform
how business is conducted.
In this research report, the Accenture
Institute for High Performance and
t
he Chinese Institute for Electronics’
Cloud Computing Expert Committee
will set out in greater detail the findings
from our survey of over 100 executives
at major Chinese organizations and
provide insight into these questions:
• What is the current state of cloud
computing in China?
• How does that compare with the
United States and other nations?
• To what extent has cloud computing
been adopted in China?
• How will that change over the next
two years?
• What are Chinese executives’ hopes
and concerns?
• How are some Chinese companies
getting started with this technology?
At the end of the report, we will
provide specific recommendations for
how cloud users, the cloud industry, and
the Chinese government can advance
the use and benefits of this technology.
Under the right conditions, cloud
computing can and should quickly
grow to play an important role in
China’s success.
China’s Pragmatic Path to Cloud Computing
4 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
What is cloud computing?
A
t its most basic level, cloud comput-
ing allows users, wherever they are, to
obtain computing capabilities through
the Internet from a remote network of
servers. (A server is a computer that
provides applications to other computers.)
(See Figure 1, “A guide to cloud
terminology.”)
When provided as a service from
other companies, cloud computing lets
organizations bypass the expense and
bother of buying, installing, operating,
maintaining and upgrading the networks
and computers found in data centers.
Instead of licensing software, users
tap into a service when it’s needed
for as long as it’s needed. All that is
required is a broadband Internet
connection, and a phone or personal
China’s Pragmatic Path to Cloud Computing
5 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
computer with a browser. Organizations
pay by the kind and amount of services
u
sed, plus any additional fees.
At the other end of the Internet
connection are computing clouds—
supersized data centers containing
tens of thousands of servers hosting
web applications. Some cloud providers
even house them in cargo ship con-
tainers.
5
Clouds are designed so that
processing power can be added simply
by attaching more servers; software can
be run on any available server with
excess capacity.
The basic technologies can be duplicated
by any company. That makes it possible
for organizations to build smaller
“private clouds” for their own use;
for a consortium to build industry
or community clouds for its members;
or a central, provincial or city govern-
ment to provide cloud services to other
a
gencies or businesses. Clouds the size
of those run by Microsoft, Amazon and
Google require additional technologies
so they can support many millions
of users around the world without
becoming sluggish.
6
This description barely skims the
surface of the underlying complexities.
But for business leaders, it gets at
two crucial points: cloud computing
combines extraordinary power with
flexibility, and in the case of public
cloud services, the major burdens and
expenses of IT power become someone
else’s problem.
Figure 1: A guide to cloud terminology
The term “cloud computing” originated as a twist on “computing cloud,” an
easy-to-draw way to portray a group of computers or the Internet itself in a diagram.
Today, cloud computing has come to encompass several kinds of services, and is
often confused with other technologies.
• Internet computing: seen by some as more fitting than “cloud” or “utility” computing
• On-demand computing: popularized by IBM
• Utility computing: popularized by author Nicholas Carr
• Software as a service: cloud-based applications
• Infrastructure as a service: processing and storing data
• Process as a service: business processes built upon cloud applications
• Platform as a service: developing, testing, and running applications on clouds or for clouds
• Public cloud: a cloud made available to the public by a company
• Private cloud: a cloud maintained for a single organization
• Community cloud: a cloud shared by groups of businesses or organizations
• Government cloud: a cloud maintained by a government agency for public use
• Virtualization: a way to run more applications or store more data on fewer computers
• Grid computing: divides processing among computers; enables speed and scalability
• Broadband Internet: enables vast amounts of data to quickly travel over the Internet
• Web 2.0: applications and technologies that make the Web a vehicle for collaboration
• Service-oriented architecture: designs systems to act like interconnected services
• Time sharing: how companies shared mainframes in the early days of computing
• Application service providers: the first software services accessed via the Web
Synonyms
Cloud services
Cloud providers
Foundation technologies
Antecedents
Private cloud platforms
Process services
Platform services
Infrastructure services
Software services
Using for
critical
applications
Testing
or piloting
Investigating Not using or
investigating
Using for
less important
applications
15% 12% 21% 26% 26%
1% 6% 15% 27% 51%
41%36%15%9%
1% 3% 22% 44% 31%
9% 21% 29% 41%
Now
1% 7% 43% 40% 9%
19% 22% 31% 24% 5%
15%31%39%12%3%
2% 11% 30% 44% 13%
3% 16% 24% 25% 32%
In two years
Private cloud platforms
Process services
Platform services
Infrastructure services
Software services
Not using clouds
Now In two years
57%
12%
88%
43%Using clouds
Figure 2: Adoption of cloud computing in China
In two years, many more large Chinese organizations will start to
use cloud computing…
Cloud computing is and will remain an
emerging technology in China for the
foreseeable future. Less than half of the
companies we surveyed are now exploring
the technology; a small fraction of these
are using it. Cloud spending is poised to
grow significantly over the next two years,
but the adoption rate will still remain
lower than in other countries because
of security fears and other concerns.
Cloud computing adoption:
a slow start
Chinese companies are starting to
investigate cloud computing, but are
moving cautiously on putting the
technology to work. For now, they are
focusing more on creating private
clouds than using public cloud services.
Only 43 percent of our respondents
are now using, testing or investigating
cloud computing, less than half as
many as in the United States. Less
than twenty percent now use public
cloud services such as cloud-based
applications (commonly known as
software as a service, or SaaS),
infrastructure services (which process
China’s Pragmatic Path to Cloud Computing
6 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
…but very few will move beyond testing and investigation, except for private
clouds and infrastructure services…
or store data on the cloud), process
services (which operate business
p
rocesses built upon cloud applications),
and cloud platform services (which are
used to create, test and host applica-
tions). Platforms for building and
running private clouds are used more
frequently. Few users are willing to
entrust critical applications to the
c
loud. Instead, they are relegating the
technology to limited, low-risk uses
and trial projects.
The State of
Cloud Computing
in China
Cloud activity in China will significantly
increase in the next two years, according
to survey respondents. The percentage
using clouds to at least some extent
will more than double. The percentage
that will use or test both private and
public clouds will reach 36 percent,
while another 40 percent of respondents
will only use or test private clouds, and
13 percent just public clouds. Most of
that use will be in the form of investi-
gating, piloting or testing cloud systems,
whereas in other nations most companies
will have moved on to implementation.
On average, 15 percent of Chinese
employees will use cloud-based appli-
cations in the next two years, while 69
percent of US employees will. Still, given
the large percentage of companies that
are investigating cloud computing today,
we expect far more organizations to
start testing and piloting clouds
beyond 2012.
Cloud computing spending:
rapid growth ahead
Given the low level of cloud activity
at this time, it is not surprising that
Chinese organizations that use cloud
computing services or build private
clouds spend only 6.3 percent of their
total IT budget on the technology, about
half as much as the American organi-
zations in our survey. And when
communications and high-tech firms
that are entering the cloud computing
market are removed from our sample,
the percentage falls to 3.8 percent.
(See Figure 4, “Cloud spending in China.”)
But spending on cloud computing will
climb rapidly in China. Of the companies
that are now using, testing or investi-
gating cloud computing, over 80 percent
of respondents say they will increase
spending on cloud computing in the next
two years, and a third say spending will
increase by 100 percent or more. This
is a slightly larger percentage than
China’s Pragmatic Path to Cloud Computing
7 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
China
S
oftware services Infrastructure services Platform services
Private cloud platformsProcess services
USA Outside China
13%
19%
75%
49%
68%
56%
32%
8
8%
58%
34%
92%
88%
65%
2
9%
9
4%
62%
3
2%
9
4%
China USA Outside China
China USA Outside China
15%
71%
86%
58%
28%
86%
62%
30%
92%
China USA Outside China
41%
54%
95%
61%
33%
94%
63%
31%
94%
8%
83%
91%
54%
35%
89%
56%
37%
93%
China USA Outside China
Testing, piloting or investigating
Using
…and adoption will continue to be slower than in the U.S. and other countries.
that reported for other nations. Even
when companies that provide cloud
services are not counted, over three-
quarters of respondents plan to increase
cloud spending. Cloud computing
appears poised to play a significant part
in China’s 11.5 percent overall increase
in IT spending, as forecast by IDC, a
global IT market research company.
7
Estimates of cloud spending in China
from market research firms vary widely.
Springboard Research estimates China’s
cloud market will grow by 56 percent to
reach US$ 171 million (1.16 billion RMB)
by the end of 2010. That is less than one
percent of the $17.4 billion spent
worldwide on cloud computing in 2009,
as estimated by IDC. CCW Research
places the total SaaS market in China
much higher, at 19.84 billion RMB in
2008, and predicts it will grow at an
aggregate annual rate of 24.5 percent
to 61.3 billion RMB by 2013.
8
Cloud computing’s potential
W
hile clouds are still too new to fully
understand their benefits, many of the
potential benefits of cloud computing
have been identified. (See Figure 3,
“Initial opportunities for using cloud
computing.”) Bargain prices on cloud
services are a big part of their allure.
For example, American drug manufac-
turer Eli Lilly paid Amazon Web Services
only US$ 89 (RMB 600) to analyze
data on a drug under development. To
do the job themselves, its researchers
would have had to buy 25 servers.
9
Add
the savings from eliminating the cost of
servers, software licenses, maintenance
fees, data center space, electricity and
IT labor, and the benefits of replacing a
large up-front capital expense with a
low, pay-for-use operating expense,
and the financial appeal of cloud
c
omputing is obvious. Private clouds
too can be less expensive to operate
than conventional data centers. Bechtel,
one of the world’s largest construction
companies, found it could reduce its
total IT costs by 25 to 30 percent by
adopting a private cloud architecture.
1
0
Clouds also offer extraordinarily flexible
resources. They are scalable because of
their technical design. Clouds can be
summoned quickly when needed, grow
by assigning more servers to a job, then
shrink or disappear when no longer
needed. That makes clouds well suited
for sporadic, seasonal or temporary
work, for finishing tasks at lightning
speed and processing vast amounts
of data, and for software development
and testing projects.
China’s Pragmatic Path to Cloud Computing
The New York Times used cloud services
to quickly and inexpensively digitize
i
ts archive of 14.5 million articles and
make them available to the public on
the Web. Researchers at the Harvard
Medical School used cloud services to
develop genetic testing models within
25 days. And media giants Time Warner
and the Disney Company are turning
to clouds to store and distribute their
movies and television shows.
Clouds can also supplement conven-
tional systems when demand for
computing exceeds supply. One US
health care claims processing company
turned to cloud services when it
suddenly needed 30 million claims
checked for accuracy.
1
1
And since they
are an operational expense, cloud
8 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
Figure 3: Initial opportunities for using clouds
Accenture has identified many different possible uses for cloud computing.
Ease of implementation
Value to the enterprise
High value
Hard Easy
Source: Accenture Technology Labs
Desktop productivity
• Web 2.0 applications
• Workgroup applications
• Office suites
• Email and calendaring
Legacy
• Specific existing infrastructure
• Complex legacy systems
Business continuity (storage)
• Extensive storage
• Backup and recovery
Software development and testing
• Software development and
testing environment
• Performance testing
• Non production projects
• R&D activities
• Reduced time to market
Geographic expansion
• Replicate standard processes in
new locations and branches.
Sensitive applications
• Mission critical applications
• Regulation-protected data
Peak load demands
• New business activities
• Applications with peak-loads
• Seasonal websites
• Applications with
scalability needs
New business
• Provide IT support for
new ventures
Batch and data intensive applications
• One-off applications that don’t rely
on real-time response
• Data and high performance intensive
applications (financial risk modeling,
simulation, data compression,
graphics rendering…)
• New back-office applications
services can often bypass the capital-
expense approval process, and thus
b
e quicker to procure than conven-
tional systems. In Eli Lilly’s case, using
clouds shaved three months off the
IT budget and approval process. That
represents US$ 1 billion (6.8 billion RMB)
in opportunity costs avoided, when
translated to faster time to market.
Clouds, paradoxically, can both
decentralize technical innovation and
impose centralized control on IT
resources. The barrier to entry for
providing an innovative IT service has
never been lower. Any programmer
could create a software service using
free or low-cost development tools,
host it on a public cloud, and quickly
make it available to all. Clouds are also
a fast and easy way for organizations
to impose a standard set of applications
or processes. Users only need pay
for a cloud service and then require
employees to go online and use it.
response time should be avoided, since
guarantees are risky when data has to
r
un over the Internet.
1
3
E
xecutives are
likely to find the greatest benefit by
envisioning new processes, applications,
services and offerings that had
been too difficult or expensive for
the organization.
Cloud computing can benefit companies
of all sizes, but it can be especially
h
elpful to small and mid-sized enter-
prises. Public clouds provide access to
advanced applications and storage
with minimal upfront costs. They also
allow small companies to conduct
business online without the risk of
having to quickly invest in buying and
installing servers should their site
unexpectedly attract large numbers
of visitors. For example, the Outback
Steakhouse restaurant chain used
cloud services to quickly develop and
host an application to promote the
restaurant on a social networking
web site. 99Designs, a small company
that connects graphic designers to
companies needing design services,
runs their service on a public cloud.
12
When considering clouds, business
leaders should begin by looking for
specific benefits for their own organi-
zation—ways to reduce costs, improve
processes and more. They should
also investigate when clouds do not
make sense. For example, to operate
a complex legacy system on a cloud
would require a costly redesign.
And projects requiring a guaranteed
China’s Pragmatic Path to Cloud Computing
9 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
Bechtel, one of the
world’s largest
construction companies,
found it could
reduce its total IT costs
by 25 to 30 percent
by adopting a private
cloud architecture.
However, not all cloud computing
services require their users to spend
m
oney. Some Chinese web sites, such
as Taobao.com, provide free email,
CRM and other applications over the
Web. While just over ten percent of
companies ban the use of such services
altogether, a large majority percent
p
ermit employees to use them on a
restricted basis.
China’s Pragmatic Path to Cloud Computing
10 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
Using cloud computing: seeking
efficiency and effectiveness
The organizations we surveyed are
not only interested in using cloud
computing to reduce IT costs, but also
to operate their businesses more
flexibly and effectively. In contrast to
executives outside of China, however,
the Chinese are significantly less likely
to view cloud computing as a means
of creating innovative products or
processes.
Saving money is certainly a main
driver of Chinese interest in clouds.
(See Figure 6, “Drivers of cloud com-
puting activity.”) “Reducing upfront
IT costs” is the most important reason
respondents say they start to explore
or use the technology. “Reducing or
avoiding the cost of maintaining IT
Figure 4: Cloud spending in China
Spending on cloud computing is relatively small, but will soon grow.
China
Average cloud spending as percentage
of IT budget
Change in cloud spending in China
during next 12 months
USA Outside China
6.3%
13.2%
17%
Remain
the same
19%
Increase
by 100%
or more
34%
Increase
less than 100%
47%
Figure 5: China and US: greatest differences and similarities
Now using or testing any form of cloud computing
Now using or testing software as a service
Considers faster product development an important driver
for cloud computing
Expects half or more of the 500 largest companies in their country to
use cloud computing for critical business activities within three years
Will use cloud computing to support projects within next 18 months
43%
89%
23%
70%
32%
62%
16%
40%
9%
40%
China USA
0 10 20 30 40 50 60 70 80 90
Planning to increase cloud spending in next 12 months
Concern about compliance with legal, regulatory and
auditing requirements
Uncertain about the ROI of cloud computing
Will use cloud computing to provide an IT platform for processes
involving multiple organizations within 18 months
Says cloud computing has no potential for their organization
81%
81%
65%
67%
50%
48%
44%
45%
1%
1%
0 10 20 30 40 50 60 70 80 90
Greatest differences Greatest similarities
infrastructure” also ranks high. Five
years from now, two-thirds believe
“
permanently and significantly lower-
ing operating costs” will be one of the
greatest benefits clouds can provide
their organization.
Companies that are the most focused
on cutting costs are using clouds to
lower the expense of running their
web sites. Chinese sites generate
millions of hits from China’s web
users. Cloud services and architectures
allow organizations to scale up and
meet demand at lower cost. Chinese
organizations show relatively little
i
nterest in using clouds to cut energy
costs or to backup data.
However, using cloud technology
to improve or facilitate day-to-day
operations is just as important as
reducing costs, if not more so, accord-
ing to survey respondents. Five years
from now, according to 70 percent,
“enabling speed, flexibility and respon-
siveness” will prove to be cloud com-
puting’s greatest benefit to their com-
pany, more than any other benefit.
China’s Pragmatic Path to Cloud Computing
11 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
How do companies plan to use clouds?
Chinese organizations are especially
i
nterested in using them to interact with
other organizations, and to promote
uniform processes among the large and
often far-flung base of users they must
support. (See Figure 7, “Putting clouds
to work,” and the profile of China Ocean
Shipping Company.) Providing an IT
platform for business processes involving
multiple organizations is by far the most
common use for clouds at this time.
Running CRM, ERP and supply chain
management applications is the second
most often cited use.
Figure 6: Drivers of cloud computing activity
Savings and operational improvement are the main
reasons Chinese organizations decide to use or explore cloud
computing. (top ten responses by percentage responding
“very important” or “important”)
0 10 20 30 40 50
49%
47%
46%
43%
42%
42%
39%
38%
36%
32%
Reduce upfront IT costs
Exchange data more efficiently with outside organizaitons
Establish uniform processes in different regions
Enable processes that are not otherwise cost effective
Improve analytical capabilities
Reduce or avoid cost of maintaining own IT infrastructure
Provide IT services where IT infrastructure, resources or labor is limited
Improve communications and collaboration between individuals
Provide platforms for standardized, efficient business processes
Develop new or improved services/products more quickly
Figure 7: Putting clouds to work
Over the next 18 months, Chinese organizations will use
cloud computing and cloud services to build platforms,
run web sites and enterprise applications, and provide
productivity tools. (top ten responses)
Provide an IT platform for business processes involving
multiple organizations
Run e-business or e-government web sites
Run CRM, ERP, or supply chain applications
Provide personal productivity and collaboration tools to employees
Back up data
Analyze data for research and development
Process and store applications or other forms
Meet spikes in demand on our web site or internal systems
Develop and test software
Analyze customer or operations data
0 10 20 30 40 50
44%
34%
34%
33%
24%
23%
21%
21%
21%
19%
Chinese companies also frequently
cite communication and collaboration
a
s an important motivation for using
clouds. One-third are using or will
soon use cloud-based productivity and
collaboration tools.
At this early stage, clouds are more
a means for providing spot solutions
than broad platforms. We expect more
Chinese respondents will seek to use
clouds as platforms for standardized,
efficient business processes in the
future than they do now.
Supporting innovation is
a low priority
Outside of China, many organizations—
especially those that are growth-focused,
or that are early adopters of IT—consider
cloud computing as a technology with
great potential for supporting product
and service innovation.
Chinese organizations show less
interest in the potential for innovation
than non-Chinese ones. Relatively few
Chinese respondents say they were
motivated to start adopting cloud
computing by the desire to develop
new services more quickly (32 percent
in China say this is very important
or important versus 62 percent in the
United States), find new ways to
engage customers (32 percent China,
64 percent US), or develop products
China’s Pragmatic Path to Cloud Computing
12 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
or services (30 percent China,
65 percent US). Likewise, less than
a
third of Chinese respondents
say “supporting product/service
innovation” is one of the main benefits
their company can gain from cloud
computing, and less than one in five
think clouds could help them expand
operations to new markets. These
percentages are higher in other
countries. (See Figure 8, “A pragmatic
vision of cloud computing.”)
In the short term, Chinese organiza-
tions are primarily focused on process
improvement, efficiency and savings,
rather than on finding innovative
ways to make use of the enormous
computing power, speed and flexibility
of cloud computing. Farther in the
future, more Chinese organizations
will start to explore the potential
of cloud computing for innovation:
significantly, 21 percent of Chinese
respondents say clouds can transform
business—more than any other country.
However, foreign companies are likely
to find ways to transform business
first, because they are more actively
seeking innovations which, intended
or not, wind up being transformative.
Figure 8: A pragmatic vision of cloud computing
China USA Outside China
0 10 30 50 7020 40 60
70%
59%
57%
Enable speed,
flexibility and
responsiveness
31%
48%
49%
Enable new,
innovative processes
18%
27%
35%
Expand operations
to new markets
28%
26%
35%
Improve decision
making
66%
58%
51%
Permanently and
significantly lower
operating costs
31%
41%
42%
Support
product/service
innovation
Over the next five years, say Chinese respondents, cloud computing’s greatest
potential benefits will be enabling savings, speed and flexibility, and lowering costs.
Chinese organizations that are interested
in cloud services have fewer choices
than in other countries. Elsewhere, a
few large global vendors have begun to
roll out a wide range of cloud services,
and are on the way to establishing
themselves as first tier suppliers. But
in China, the same global firms are
less visible. Few domestic firms have
ventured into cloud computing, and
their offerings are primarily focusing on
SaaS. As a result, Chinese organizations
that wish to use cloud computing do
not yet have a variety of established,
trusted brands and services to choose
among. This is one factor slowing
down cloud computing in China.
Globally, the cloud services market is
developing in three phases: establish,
partner, and broaden. The market was
established first by American Internet
pioneers like Google, Salesforce.com,
Amazon.com and Facebook, which
were soon joined by established IT
companies like Microsoft, IBM, Fujitsu
and SAP, telecom companies like
Singapore’s SingTel and Japan’s KDDI,
business process outsourcers like
India’s HCL, and startups like Joyent.
14
The companies that establish the
market then forge partnerships with
c
onsulting firms such as Accenture,
provide infrastructure services to other
companies entering the SaaS market
or enter marketing alliances. For
example, cloud services providers in
Europe have formed an organization
called EuroCloud to promote locally
based cloud companies
15
While they
partner, cloud providers broaden their
offerings by entering other cloud
services markets, as SaaS provider
Salesforce.com did when it launched
its Force.com cloud development
platform. Gartner, a global IT research
firm, has identified at least 30 cloud
concepts and technologies which pro-
vide opportunities for offering services.
1
6
In China, for now, the market is still
being established. Partnerships have
been limited to ventures between local
authorities and foreign companies.
Cloud providers have not yet started
to broaden their line of offerings.
As in Singapore, one of the first major
domestic players is likely to be a large
telecom company. China Mobile’s
BigCloud offering will provide mobile
Internet services including storage to
consumers and enterprises.
17
A few
other stars of China’s high-tech and
Internet industry are entering the cloud
market. The Alisoft subsidiary of the
Alibaba Group, known for its online
B2B marketplace that matches Chinese
suppliers with foreign companies, is
promoting its new “Shopkeeper”
China’s Pragmatic Path to Cloud Computing
13 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
accounting and financial management
SaaS services to small and midsize
e
nterprises.
1
8
L
enovo, China’s largest
PC maker, will start offering SaaS ser-
vices and thin-client PCs designed for
cloud computing. (Thin clients, unlike
conventional PCs, lack the processing
power and memory to run most software
programs, and rely on servers connected
via the Internet or a company network.)
Sogou.com, the search engine subsidiary
of Internet portal Sohu.com, offers a
free cloud-based “input service” for
entering thousands of Chinese characters.
In addition, dozens of other Chinese
companies and startups are entering
the software, infrastructure and plat-
form service markets. (See Figure 9,
“A partial list of Chinese cloud service
providers.”) Fifty Chinese IT companies
and research firms have banded
together to form a cloud computing
committee comparable to the
EuroCloud initiative.
19
To date, the major foreign cloud com-
puting providers have only a limited,
supporting role in China’s cloud com-
puting market. They are establishing
themselves through partnerships with
local development agencies, companies
and universities. For now, they are not
rolling out the same cloud product
line they offer in other countries.
The cloud services market
in China
Microsoft has not yet begun to offer
its Azure platform in the People’s
R
epublic, although it has started to
in other parts of Greater China. It has
teamed up with Suzhou Industrial
Park and Fengyun Network services
to provide SaaS services to small and
mid-sized enterprises. Microsoft
provides the SaaS platform and back-
end technology, upon which Fengyun
develops SaaS. Microsoft has also
established a Cloud Computing
Training center in Hangzhou, which
provides cloud computing sources and
services to small and mid-sized
Chinese businesses.
2
0
For the municipality of Wuxi, IBM has
built a cloud computing center at the
Wuxi Tai Hu New Town Science and
Education Industrial Park. The center
provides IT services to local high-tech
companies and government agencies.
21
IBM also plans to build cloud centers
in Hong Kong, and in the capital with
the Beijing University of Technology.
22
Joyent, an American company,
brought its cloud computing
infrastructure, web hosting, and appli-
cation services to China by working
with the Qinhuangdao Economic and
Technology Development Zone.
23
NTT Data of Japan recently launched a
joint venture with Yuchang Technologies
L
td. to provide cloud services, as well
as systems integration and consulting
services, to China’s banking industry.
2
4
Dell has signed a memorandum
of understanding with Beijing
Infobird Co., Ltd. to provide cloud-
based call centers in China.
25
These arrangements with development
agencies and Chinese companies can
help foreign cloud service providers
gain trust and build the Chinese cloud
market. Because of security concerns,
Chinese enterprises are reluctant to
use foreign cloud providers, especially
if they do not have data centers with-
in China. Chinese customers are more
likely to have confidence in foreign
cloud companies if they build data
centers in China, and partner with
Chinese agencies and cloud providers.
Still, until they can venture out on their
own or form more alliances, Chinese
users will have limited access to the
major global cloud service providers.
China’s Pragmatic Path to Cloud Computing
14 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
China’s Pragmatic Path to Cloud Computing
15 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
Figure 9: A partial list of Chinese cloud service providers
V
endor
21ViaNet
800Apps
Alisoft
(Alibaba Group)
China Mobile
CNSaaS.com
eAbex
Infobird
Inspur (Langchao)
Jingoal
Lenovo
Sogou.com
Wecoo.com
(Ufida Software)
Xtools
Youshang.com
(Kingdee
International
Software Group)
Yoyo Systems
Yucheng
Lian Rong Data
Technologies
C
loud service
Infrastructure
Software
Software
Platform
Software
Software
Software
Software
Software
Software
Software
Software
Software
Software
Platform
Software
A
vailability
Now
Now
Now
This year
Now
Now
Now
Next two years
Now
This year
Now
Now
Now
Now
Now
2010
D
escription
Data center service provider entering IaaS market
Start-up provides CRM services
CRM, sales force management, inventory management,
financial and marketing information management service
Mobile internet cloud services
Joint venture between Fengyun Network, Suzhou Industrial
Park and Microsoft China; uses Microsoft as platform for
offering SaaS services to Chinese small and midsized businesses
Management software and e-business services
Call center systems and service provider partnering with
Dell to provide cloud-based services
Server software and manufacturing company
Management software and service provider
SaaS services, cloud-based storage, thin-client PCs for
cloud computing
Free cloud-based input service for entering Chinese pinyin
Online marketing and management services
CRM
Online management e-business services
Has cloud R&D centers in China (Beijing Zhongguancun) and
US (Silicon Valley)
Joint venture between NTT Data Technologies of Japan with
Yucheng Technologies, a Chinese company offering systems
and call centers for the Chinese banking industry.
What Makes
China Cautious?
China’s approach to cloud computing
can be summarized as not just conser-
vative and pragmatic, but also as
cautious. What is keeping China from
adopting cloud computing more quickly?
Why are Chinese organizations focusing
much more on building private clouds
than on public clouds? And why have
they pursued thus far the more modest
benefits of efficiency, but not the
more substantial ones that come from
innovation? Our data suggests that the
use of cloud computing is influenced
by several factors that are unique or
especially prevalent in China.
Lack of knowledge deepens
caution.
Executives all over the world are still
attempting to understand what cloud
computing is, how it can be put to
work, and what the costs and risks are.
However, knowledge of cloud computing
among IT executives remains lower in
China than in other nations in our survey.
Only 21 percent of Chinese IT executives
describe their level of knowledge as
either advanced or expert. This was
the case even though Chinese respon-
dents were more likely to be the top IT
executive in their organization than
respondents elsewhere. In the other
countries in our study, 64 percent of IT
executives claimed advanced or expert
knowledge of this new technology.
One reason China’s IT executives know
less: since only 43 percent of the
Chinese survey respondents work in
organizations that operate both inside
and outside of China—and few of
these operate outside of Asia—many
Chinese IT executives have not been
exposed to how foreign competitors
are using clouds.
Until they know more, Chinese respon-
dents tend to take a cautious stand
towards this new technology. They
have many concerns about the tech-
nology, and the extent of their concern
is higher than other nations. (See
Figure 10, “Concerns about cloud
computing.”)
They are also more divided over what
cloud computing can do for their
organizations. Chinese executives are
more likely to view cloud computing
as a temporary fad, and less likely to
be convinced that their organizations
China’s Pragmatic Path to Cloud Computing
16 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
need to adopt the technology or that
other large companies in their country
will quickly adopt cloud computing.
They also display less confidence that
cloud computing can solve their most
difficult problems, or bring lasting
competitive advantage (See Figure 11,
“Skepticism about cloud computing.”)
“Compared with traditional IT applica-
tions, cloud computing can optimize the
IT infrastructure and save money,” says
Zhu Dong, director of the information
and technology department, China
National Aero-Technology Import &
Export Corporation. “But whether cloud
computing can work reliably, fast and
flexibly is still hard to know. Cloud
8
9%
79%
76%
75%
71%
71%
68%
67%
65%
63%
Data security/privacy/confidentiality issues
Integration with existing systems
Service level agreements/guarantees/contact issues
Reliability/uptime/business continuity issues
Legal or regulatory ambiguity
Maturity of cloud computing market
Loss of control/ownership of IT
Lack of industry standards
Compliance with legal, regulatory and auditing requirements
Features, functionality and performance
0 10 20 30 40 50 60 70 80 90
Figure 10: Concerns about cloud computing
Security, integration and reliability top Chinese concerns with using public cloud
services (top ten concerns; percentage “very concerned” or “concerned”)
China’s Pragmatic Path to Cloud Computing
17 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
computing is still in its infancy. It is too
optimistic to say that cloud computing is
a
game changer. There is a long way to go.”
In their personal lives, Chinese consumers
are notably wary about product claims,
and frequently conduct product research
and seek personal recommendations
before a purchase decision.
2
6
Similarly, it
will take experience, personal recommen-
dations and the opportunity to research
the technology before the Chinese trust
cloud computing enough to embrace
it. The more leading companies in China
adopt the technology, the more likely
others will too. But until they see real
benefits, and become better educated
about cloud computing, Chinese executives
are more likely to give credence to the
technology’s potential problems than its
possible benefits.
Security concerns make Chinese
companies wary of using clouds.
Security is the main concern with cloud
computing across the world. But in
no nation are these worries stronger
than in China and they force Chinese
CIOs to take a cautious approach, espe-
cially with public cloud services.
Fifty-nine percent of Chinese respon-
dents say they are “very concerned”
about data security, privacy and confi-
dentiality on the cloud, compared to 50
percent in the US and 42 percent for
nations besides China. The Chinese are
more likely to state their organization
has data which is too sensitive to allow
outside the walls of their enterprise
than respondents in nearly all other
nations. Chinese executives especially
worry that their data could be stolen by
hackers, or accidentally released to
other customers of a cloud provider or
to the wrong employee. (See Figure 12,
“Data security worries.”)
Figure 11: Skepticism about cloud computing
Compared to other nations, fewer Chinese executives are convinced of the potential
of cloud computing to provide competitive advantage, solve difficult business issues,
or the need to adopt the technology. (Percentage “substantially agree” or “agree to
a very large extent”)
China USA Excluding China
18%
33%
38%
My organization needs to adopt cloud computing
21%
42%
48%
Cloud computing can help solve our most difficult business issues
23%
37%
47%
Cloud computing could provide my company with a lasting competitive advance
0 10 20 30 40 50
Figure 12: Data security worries
China USA Outside China
0 10 20 30 40 50 60 70 80 90
Hackers could steal our data from the cloud provider
81%
76%
71%
Cloud providers may permit access to data to the wrong employees
79%
61%
61%
Other customers of our cloud provider might obtain our data by accident
75%
53%
47%
Physical security at cloud vendor locations
59%
45%
33%
Foreign governments may obtain my organization’s data from the cloud provider
56%
52%
51%
Chinese executives cite more data security and privacy issues as concerns to their
organization than executives in other nations. (Percentage “substantially agree” or
“agree to a very large extent”)
But executives at the Chinese enter-
prises we surveyed—many of which are
p
artially or entirely state-owned—are
also concerned with possible national
security risks from the cloud, since
public cloud computing environments
are externally provided and shared. Fifty
percent of respondents say the single
greatest factor impeding the adoption
of cloud computing is that Chinese
business leaders worry that cloud
computing could damage China’s
national security.
Along with Chinese officials, business
leaders fear that highly confidential data
about the Chinese economy, military,
and government, as well as crucial tech-
nology and science developments, can
be stolen or accidentally disclosed to
foreign competitors, or end up in the
hands of groups or individuals who seek
to overturn the national government.
And like their peers in other countries,
slightly more than half of Chinese exec-
utives worry that foreign governments
could obtain data from cloud providers.
Data privacy laws and regulations are
still in their infancy in China, so the
guidelines and requirements for securing
data remain unclear. The untested nature
of the cloud market further undermines
confidence that cloud providers are
capable of securing data on the cloud.
“I do not have confidence in public
clouds,” says Xiao Peng, the CIO of
ENN Group. “Data security is of the
highest concern of our executives. We
are reluctant to store sensitive data and
commercial secrets on public clouds
that can be shared by other customers.
Accidental release of the data to our
competitors could have a disastrous
impact on our company. We won’t trust
public clouds unless the relevant laws,
regulations and service level agreements
are implemented to periodically assess,
monitor and audit providers.”
Chinese organizations are likely to
limit their use to private clouds,
despite its potential benefits, until
they are more confident the cloud
can be secured.
An immature cloud market
provides few services and
trusted vendors.
Nearly two-thirds of Chinese respondents,
nearly all of whom are IT executives,
say Chinese business leaders believe the
cloud market is still immature, which
makes this issue a top factor impeding
the adoption of cloud computing. But
the limited offerings that are available
today are only part of the problem.
(See “The cloud computing market”)
Chinese organizations are especially
reluctant to use foreign cloud providers
or turn to start-up companies, given
their concerns about the reliability of
China’s Pragmatic Path to Cloud Computing
18 | Accenture Institute for High Performance | Copyright
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cloud services and the sensitivity of their
data. A scant two percent of Chinese
respondents said they are definitely or
probably willing to source cloud services
from a startup, and only 28 percent
say they are possibly willing to do so.
That is far fewer than respondents in
the US and other nations. Fifty-eight
percent of American executives say they
are or might be willing to use cloud
services from new companies.
Chinese organizations are also averse
to entrusting foreign providers with
their data. Less than half say they are
willing, even if the provider keeps the
data within China’s borders. The number
falls to below 20 percent for foreign
providers that do not have cloud data
centers in China. (See Figure 13,
“Willingness to use foreign cloud
providers”)
Figure 13: Willingness to use foreign cloud providers
Chinese organizations are adverse to letting sensitive data leave the country.
They strongly prefer to entrust customer, employee or patient data to domestic
cloud service providers. (Percentage definitely, probably or possibly willing)
Foreign provider with foreign cloud
Foreign provider with local cloud
Domestic provider
China USA Outside China
18%
4
0%
62%
46%
68%
78%
66%
85%
87%
0 10 20 30 40 50 60 70 80 90
Most Chinese executives would prefer
to use proven and well-established
d
omestic cloud vendors. But at this time,
few if any meet that description. The
best known cloud computing brands
are American. Domestic companies in
the cloud market are still establishing
themselves and their own credibility.
As a result, only 14 percent of Chinese
executives say they are definitely or
probably willing to use their current
IT and telecommunications vendors,
far lower than the 77 percent of
American respondents who would be
willing to do so.
Chinese CIOs are in a difficult position.
“Even though local venders cannot
compete with global companies because
of technical barriers, we are reluctant
to use foreign cloud providers,” says
Ding Tao, an IT executive with Shenhua
Beijing Guohua Electric Power Co., Ltd.
“I still believe that local Chinese cloud
providers will provide better services
to local customers. The domestic cloud
computing market is immature. There
is an urgent need for the government
and organizations to push forward the
establishment of technology standards.
This will require a joint effort of
consultants, integrators, vendors,
institutes and government.”
Until domestic vendors start providing
more cloud services and earn the trust
of Chinese corporations by offering
guarantees and service level agreements,
and foreign firms prove they can keep
Chinese data secure, Chinese organiza-
tions will not eagerly use their services.
Limited use of virtualization,
slow broadband speeds and
questions about integration
hamper public and private
clouds.
Virtualization makes cloud computing
possible. Chinese IT executives say that
the extensive use of virtualization is the
most important thing a company can do
to speed up its adoption of cloud com-
puting, along with providing evidence
to top executives that cloud computing
significantly lowers costs. However, far
fewer Chinese companies have committed
to the technology than those in the
United States or other nations.
27
(See
Figure 14, “Adoption of virtualization”)
China also lacks a broadband network
that can support cloud computing
across the country. China is a world
China’s Pragmatic Path to Cloud Computing
19 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
leader in broadband penetration:
94.3 percent of Chinese Internet
u
sers have broadband access. But most
download speeds available in China
reach no more than 4 Mbps (megabits
per second). That is considerably lower
than the average speed of 17.4 Mbps
found in developed countries. Other
Asian countries—most notably Japan
and South Korea—provide download
speeds that are up to 20 times faster
than those in China.
2
8
After data security, Chinese IT executives
are most concerned about integrating
clouds with existing systems. For
example, how many sources of data
can a cloud-based application draw
upon before it becomes sluggish? Will
it be more challenging to integrate
data when it must be shared between
cloud services or with their complex
Figure 14: Adoption of virtualization
Chinese organizations are least likely to have extensively or moderately virtualized
their servers. However, 63% of Chinese organizations are considering virtualization.
China USA Outside China
18%
64%
14%14%
74%
63%
Already virtualized Considering virtualization
conventional systems? How do
companies make sure they can easily
r
eclaim the data held for them by one
cloud provider, so they can easily
switch to another?
Chinese organizations will find it
difficult to utilize public clouds, and
be unable to implement private clouds
as broadly as they might, until answers
are found to these questions about
integration, more companies adopt
virtualization, and faster broadband
services become available.
Chinese IT executives want
the government to help make
cloud computing more secure
and reliable.
The Chinese central government has
declared “informatization” (the appli-
cation of information technology in
business, government, and education)
one of its most important economic
priorities.
29
Cities and provinces such as
Nanjing are supporting the software-
as-a-service industry by teaming up with
foreign and domestic cloud providers
to build cloud computing centers that
provide e-commerce and computing
services to local businesses.
30
However, government support for
cloud computing is primarily focused
on extending SaaS to China’s 42 million
small and mid-sized businesses. Less
than ten percent of these companies
now conduct business online, and cloud
services can provide access to the IT
resources they need to do business on
the Web.
31
The initial steps by govern-
ment have not convinced large organi-
zations to move forward on cloud
computing. Fifty-one percent say official
Chinese policies on cloud computing
are unclear, and are one of the major
impediments to cloud computing.
As one Chinese CIO told us, “I am not
optimistic about cloud computing and
storage unless… laws, regulations and
SLA agreements have been put into
practice.”
Respondents are split on whether it is
necessary for the government to show
it supports the use of the technology. But
there is a consensus that the govern-
ment should be involved in setting
standards and regulating the industry.
Cloud computing must be made safer,
technically and legally, if it is to be
used more widely in China.
China’s Pragmatic Path to Cloud Computing
20 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
Compared with traditional IT applications, cloud
computing can optimize the IT infrastructure and
save money. But whether cloud computing can work
reliably, fast and flexibly is still hard to know.”
— Zhu Dong, director of information and technology department,
China National Aero-Technology Import & Export Corporation
“
Figure 15: “Explorers” first to adopt cloud computing
Cluster analysis reveals four kinds of Chinese organizations. The “explorer”
group will adopt clouds faster and more broadly than “pessimists,” “observers”
and “budget cutters.” (average level of adoption in two years)
5 – Using for critical applications
4 – Using for less important applications
3 – Testing or piloting
2 – Investigating
1 – Not using or investigating
Explorers Pessimists Observers Budget cutters
Software services Infrastructure services Platform services Process services Private cloud platforms
3.23
1.91
1.93
2.33
3.09
1.48
2.00
2.33
2.97
1.87
2.59
1.80
3.40
1.96
2.38
3.66
2.96
1.73
3.62
1.80
Explorers,
Budget-Cutters,
Observers and
Pessimists
All Chinese organizations need to
navigate between the possibilities of
cloud computing and their concerns
about security, data integration,
reliability and other issues. However,
only about one third of the Chinese
organizations in our study are doing
so in a way that leaves them well
positioned to take full advantage of
the technology.
These explorers are found in nearly all
industries, although the most common
o
nes are high tech and communications,
consumer goods, and energy. They are
more likely to be currently investing
or testing all the variants of cloud
computing today and in two years will
be ahead of other Chinese organizations
in cloud implementations. And as is to
be expected, they are spending more on
cloud computing than other organiza-
tions, and provide cloud services to a
higher percentage of employees. (See
the profiles of Xiwang Group, China
Ocean Shipping Company and Jiangsu
Electric Power Company for examples
of early adopters.)
China’s Pragmatic Path to Cloud Computing
21 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
Several factors besides the pace of
adoption distinguish these companies:
Explorers see cloud computing’s
long-term potential for innovation
and process improvement. Nine out
of ten explorers say cloud computing
has long-term potential to enable
speed, flexibility and responsiveness,
and half also say it will support prod-
uct and service innovation. They also
strongly believe cloud computing will
lead to important new innovations in
business technology and will transform
the software industry. Explorers also
say cloud computing will transform
business.
Founded in 1986 and located in
the grain-growing area of Zouping,
Shandong Province, Xiwang Group is
large for an enterprise that is not owned
by the state. The company processes
corn to make corn starch, corn oil,
dextrose, gluconate, fructose and other
products. Its annual corn-processing
capacity is 1.8 million metric tons.
With over 10,000 employees and eight
subsidiaries, sales revenue reached
15.3 billion RMB (US$ 2.24 billion) in
2009. Its core subsidiary, Xiwang
Sugar Co., Ltd. was listed on the Hong
Kong Stock Exchange in 2005.
A few years ago, Xiwang’s share of the
Chinese market for dextrose reached
70 percent; for gluconate, 80 percent.
However, the company mainly supplied
clients with raw materials, and profit
margins were low. It needed to reposition
itself for future growth.
Top management made a couple of
decisions. First, it would transform
itself from a pure B2B player into both
a B2B and B2C business, exploring the
mass consumer market for corn oil and
fructose. Second, to better implement
this new strategy, management decided
to relocate the company headquarters
from Shandong to Beijing, the center
of commerce and politics.
To carry out the strategy, Xiwang’s
leadership realized it needed a new
IT infrastructure to support its
new consumer business and decided
to explore cloud computing. Past
experience in constructing IT systems
contributed to its interest in cloud
c
omputing. A few years before, Xiwang
had implemented a local Chinese ERP
system to meet its growing business
needs. As many difficulties and conflicts
with existing processes arose, the
transition was not smooth. Employees
resisted using the system, and it had
to be aborted after less than four
years in operation. The company’s top
management saw an easier-to-use
alternative in cloud computing.
Xiwang selected 800App, a local Chinese
SaaS provider that began business in
2004, for its CRM software service.
The company began using the service in
late 2009, paying for it on a fee-per-user
basis. Xiwang provides access to the
CRM portal to about 50 users located
in over ten cities nationwide, including
eight external distributors. These 50
users utilize data collected by several
hundred Xiwang employees who
upload data on their mobile phones
from stores, warehouses, distribution
centers and delivery routes.
To choose the vendor, the Xiwang
engaged in several rounds of discussions
on needs and requirements, service
levels, and web page design. 800App
gave Xiwang the chance to run trials
of the service before signing up. The
terms of the contract were also care-
fully negotiated. One particular feature
of the negotiating process played a
critical role in Xiwang’s decision to
use 800App: The cloud service provider
assigned staff members to temporarily
act as Xiwang’s representatives during
the discussions. They worked with
Xiwang to identify its business and
technical needs, and then raised those
China’s Pragmatic Path to Cloud Computing
22 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
needs to 800App on behalf of Xiwang.
This arrangement increased the company’s
c
onfidence and trust in 800App.
So far, the five-month operation has
produced satisfactory results and benefits.
First, the transition to the new system
was smooth and quick. The company
was able to launch the new CRM
application in three months instead of
the nine to twelve months it would
have taken to install a conventional
CRM system. The system is simple and
easy to learn; once up and running,
few changes were necessary. As a
result, employees are more receptive
of the new system than they were to
the old ERP system.
Second, the new service, which is
customized to meet Xiwang’s business
requirements, increased the company’s
efficiency. It is not only loaded with the
usual CRM software features, including
sales planning, order tracking, expenses
control and status reports, but it also
provides video conferencing, office
automation, email, and some financial
functions. No matter where a manager
is, access to the Internet enables him
or her to process and approve requests
within 24 hours instead of three or
four days as was the case before.
Third, the ongoing costs are only a
fraction of several million RMB it
would have cost to install an in-house
system. Instead, Xiwang pays 60,000
to 80,000 RMB annually, less than
what it would have spent on mainte-
nance for a conventional system.
Cloud computing aids
business transformation at
Xiwang Group
Encouraged by the initial benefits,
Xiwang’s management anticipates
g
radually adding more services to the
800App system. Over time, it will
become a broader, quasi-ERP type of
management service. It is likely that the
company will also move its B2B busi-
ness operations to the 800App system.
Such plans would not be possible
without adequate assurances on security.
The trust established during the vendor
selection, and subsequent interactions
with the vendor, is critically important.
Even so, the two companies are con-
sidering how 800App can run Xiwang’s
data while storing and handling it on
Xiwang’s own server. This would
ensure that 800App would not have
access to sensitive Xiwang data.
Asked what accounted for the success
factors of cloud computing, Zhang
Xuesen, sales manager of Xiwang’s
Beijing subsidiary, noted that the
reliability of the service is important.
“The less downtime and support required,
the more successful the service is.”
But the most important factor was
p
eople, says Zhang. “Employees who
use a cloud computing service should
first of all be able to specify their
requirements, be willing to accept the
change, and have the willpower to
stick to it all the way through. In fact,
good cloud services should be designed
to be foolproof. Once the user gets
through the initial adjustment period,
using the service should be a habit. It
is people who decide the success rate
of the cloud.”
China’s Pragmatic Path to Cloud Computing
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They are exploring many potential
benefits from cloud computing.
E
xplorers are strongly interested in
using cloud computing to reduce
business and IT costs. But they are also
show interest in using clouds to extend
their organization’s capabilities, by
enabling processes that would not
otherwise be cost effective, developing
new products and services and provid-
ing IT platforms for processes. At this
early stage, and because they come
from many industries, it is not yet
possible to point out a distinctive
pattern of current uses. However, 43
percent are using clouds to run CRM,
ERP or supply chain systems, and to
test software.
They are more open to using foreign
cloud providers. While explorers are
concerned about the risk of sensitive
data leaving the country, they are
somewhat more willing than other
companies to use foreign cloud
providers, as long as they have a data
center in China.
They are more likely to outsource
their IT infrastructure and adopt
virtualization. Explorers are less
concerned with owning their IT infra-
structure. They are also further along
in deploying virtualization, which
enables them to move forward on
building internal clouds.
They believe cloud computing is
important for China. Explorers are
m
uch more likely to agree that cloud
computing is important to China’s
economic competitiveness than other
Chinese executives. They are also
more likely to expect other Chinese
companies to adopt the technology.
Our cluster analysis of Chinese organi-
zations revealed three other groups in
which Chinese organizations tend to fall.
The budget-cutters are adopting
private clouds and platforms as quickly
as the explorers, but they lag in their
use of other kinds of clouds. Nearly
40 percent of the enterprises in this
cluster are in high-tech, communica-
tions and energy. Besides their interest
in private clouds, they are distinguished
by their strong long-term focus on
cost reduction. They see few other
potential benefits from the technology
five years from now, except enabling
speed and flexibility. Reducing costs
and establishing uniform processes are
the two main reasons they are pursu-
ing clouds. This narrow focus could
limit the gains they can obtain from
the technology.
The two other groups will still primarily
be in the investigation and testing
phases of using private and public
clouds two years from now.
Cloud observers are interested in using
private and public clouds to run busi-
nesses more effectively and efficiently,
but they want to see the technology
and the market develop further before
they move forward. They are held back
by concerns over the immaturity of
the cloud computing market and the
ability to integrate existing systems
with clouds.
China’s Pragmatic Path to Cloud Computing
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They also most frequently cite executive
support, better understanding of cloud
c
omputing, and the ability to oversee
cloud initiatives as internal factors
that need be addressed in order to
accelerate cloud adoption. Until the
cloud market matures and other
Chinese companies successfully begin
to address these internal issues, the
observers will hold back.
Another group can be described as
cloud pessimists. In their view, cloud
computing will either be a passing fad
or will be used just as a way to save
money. Respondents in this group will
start to test private clouds in two years,
but they foresee spending less on
cloud computing, and lower levels of
employee usage, than other respondents.
The pessimists want to use cloud
computing to improve business
decision making and enable innovative
processes, not unlike the early adopters.
But they lack confidence in the
technology’s future in China. They are
much more likely than other respon-
dents to cite a lack of clear government
policies on cloud computing, or con-
servative attitudes about technology
adoption by Chinese business leaders,
as impediments.
China Ocean Shipping (Group) Company
(COSCO) is the world’s second-largest
ocean shipping company, and China’s
largest group specializing in global
shipping, modern logistics services, and
ship building and repairing. COSCO was
number 327 on the Fortune Global
500 in 2009 with US$ 27.4 billion
(187 billion RMB) in annual revenues.
It is also one of the ten most profitable
state-owned companies in China.
Since 2004, COSCO has created a
return of over 10 billion RMB per year.
COSCO requires an up-to-date IT
infrastructure to manage its massive
operations. The company owns or
operates a fleet of more than 800
modern merchant vessels, which sails
to over 1,500 ports in 160 countries
and territories across the globe. The
group includes more than 1000 business
subsidiaries in over 50 countries and
territories around the world.
To support its employees, distributors,
subsidiaries and customers, COSCO
operates a logistics transport and
shipping system. But as operations
expanded, so did the number of users,
from 4000 to more than 10,000. The
company’s servers, scattered throughout
China, were not able to handle the rapid
increase of users and data processing.
Instead of adding servers, top manage-
ment has decided to make better use
of the computing resources it already had.
COSCO has turned to virtualization—
a computing technique that enables
s
oftware to run on any available
server in a network—to integrate its
data processing capabilities. With
virtualization, people throughout the
supply chain draw on a cluster of
servers dispersed in the network. This
architecture makes more efficient
use of its servers, thereby reducing
energy consumption, while adding
additional server capacity automatically
when needed.
Having virtualized many of its servers,
one COSCO unit is now looking to use
them to support a cloud computing
service. In 2009, COSCO Logistics
Network Information Technology Co., Ltd,
the arm of COSCO that provides IT
services inside the group and out-
sourcing services to other companies,
began to reestablish its supply chain
management system upon a cloud
computing architecture. “Our goal
is to provide SaaS service to all our
customers, subsidiaries and distributors.
This will allow them to avoid the huge
investment and risk of establishing
and maintaining their own logistics
management software,” said Huang
Dalei, the senior consultant of COSCO
Logistics Network.
This service will reside on an enterprise
private cloud that will be built within
the group. It will include shipping,
transportation, order management,
billing and payment applications that
will improve business processes and
take COSCO’s customer service to a
higher level. All these applications will
be integrated through the use of a
China’s Pragmatic Path to Cloud Computing
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services-oriented architecture, a way
of designing systems that makes it
e
asier to share data and information.
Security is assured through the system’s
identity management capabilities,
including member login and access
management. “We have a confiden-
tiality agreement in the contract with
COSCO, specifying rigorous rules on
data safety,” Huang said. “We can’t
afford to accidentally release data
to wrong employees.” He added that
there has been no record of data
exposure in past years.
The transformation of COSCO’s supply
chain systems into a set of software
services is still in the trial stage, but
Huang expects they will complete the
move within a year.
Cloud computing integrates a
global supply chain for China
Ocean Shipping Company
Moving Forward
Cloud computing has great potential
for supporting China’s large enterprises,
its millions of small and mid-sized
enterprises looking to use technology
with minimal cost and administrative
burden, and its high-tech industry,
which stands poised to profit from cloud
services. Cloud computing can make
an important contribution toward the
growth of China’s economy. To achieve
its full value, all the parties involved
must take a number of important steps.
Government leaders
C
hinese executives are looking to the
government to play a leading role in
the establishment of cloud computing
as a reliable and viable technology.
A mix of regulation, investment and
support is required if China is to
optimize the use of clouds.
Continue to support and expand
local cloud computing centers. These
centers provide cloud services to local
businesses and government agencies,
establish partnerships between foreign
cloud providers and local software
companies, create IT jobs, provide cloud
computing training, and develop the
local IT sector. In the long run, they
will provide new cloud services for the
Chinese and global market and
become centers of IT innovation.
China’s Pragmatic Path to Cloud Computing
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Figure 16: Recommendations for advancing cloud computing in China
Support: Continue establishing local cloud computing centers and partnerships, and encouraging new cloud providers.
Improve: Increase the speeds and availability of China’s broadband infrastructure.
Regulate: Establish clear guidelines and standards for cloud security, reliability, and service provider certification.
Use: Set example for industry by using cloud services in government.
Learn: Become well educated about cloud computing technology, requirements, risks and benefits.
Influence: Win executive support by presenting evidence about cloud benefits and ROI.
Solve: Identify technical and security issues with clouds, and develop plans to resolve them.
Innovate: Seek out and develop innovative ways to use clouds.
Analyze: Conduct a careful analysis of costs, savings and benefits.
Assign: Decide who should be involved in cloud computing decisions, and what their responsibilities are.
Lead: Make sure cloud computing receives focused thinking, planning and follow-through from IT and
business executives.
Sponsor: Provide necessary financial, management and human resources support.
Choose: Carefully select and evaluate cloud providers.
Assure: Gain trust through service level agreements, stringent security standards, and studying clients’ business
requirements.
Offer: Provide a broader range of cloud services.
Cooperate: Participate in establishing industry clouds.
Publicize: Provide the public with examples of successful cloud computing adoption in China and other nations.
Government
leaders
Senior IT
executives
Senior business
executives
Cloud computing
industry leaders
Improve China’s broadband
infrastructure. China should bring
b
roadband speeds to levels comparable
to other leading industrial nations.
In particular, China should install
high-speed fiber-optic networks as
part of its infrastructure-building pro-
gram, and promote high-speed mobile
network technologies. South Korea
expects to create 120,000 new jobs by
boosting its broadband speeds ten
times to one gigabyte per second and
wireless broadband to ten megabytes
per second.
3
2
Develop regulations and guidelines
to improve cloud security, reliability,
and business practices. For cloud
computing to be widely adopted, say
Chinese executives, the government
should establish cloud security, data
privacy and technical standards. Almost
A large subsidiary of State Grid
Corporation of China, Jiangsu Electric
Power Company (JEPC) builds, maintains
and manages the power transmission
grid and supplies power to Jiangsu
Province, one of the most economically
developed provinces along China’s east
coast. JEPC has a workforce of more
than 93,000 employees, 13 branches
in major municipalities, 58 sub-branches
in counties, and 1,697 rural outlets.
In 2008, the company sold 247 billion
kWh of electricity and generated
revenues of 210.9 billion RMB
(US$ 30.9 billion).
Over the years, JEPC has developed
a comprehensive IT network that
connects the four layers of its organi-
zational hierarchy and covers the
whole province. Business applications
residing on the network include sales,
finance, production, office automation,
human resources and business and
financial planning. While the system
has played a key role in business oper-
ations, it has become very complex,
with about 2,000 mainframes and
numerous servers operated and main-
tained by more than 1,000 IT staff.
Specifically, three problems exist: First,
the system is not integrated enough
to serve the needs of company-wide
coordinated operations. Data is often
not shared throughout the whole com-
pany. Second, information is stored in
isolated silos, with each subsidiary
building its own data storage system
and using different vendors. Third,
JEPC has had to rapidly increase its
investment in hardware, especially for
s
ystem maintenance and upgrading.
Quantity of data was another issue.
Over the years, JEPC had accumulated
huge amounts of data on customers,
operations and administrative activities.
New data files, text documents, charts
and drawings, images, audio and video
files were added daily. Management
sought to apply a more rigorous
approach to using data.
Top executives decided to turn to
cloud computing in their effort to use
data for business improvement. Cloud
computing provided a way to create
an integrated system that would
support different historical databases.
A traditional relational database was
not capable of integrating all the data;
only a virtualized database, supported
by cloud computing, could do the job.
JEPC selected Yoyo Systems, a cloud
computing service company founded
in 2007, as its provider. Using the
cloud computing platform developed
by Yoyo Systems, JEPC built a virtual
networked data storage and processing
cloud without adding any new hard-
ware or moving its equipment. The
system was developed between June
2008 and October 2009.
JEPC’s private cloud enabled the
company to better store, search and
manage the massive amount of data
it had accumulated. Users can access
and manage both structured and non-
structured data from a single interface,
no matter where the data resides. Now
the company plans to explore the
analytical capabilities its private cloud
makes possible, and to add knowledge
China’s Pragmatic Path to Cloud Computing
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management features to the system
such as a search engine, online
l
earning, and new employee training.
In the future, this private cloud can
be expanded to provide a platform
for a “smart grid.” In a smart-grid
electric utility operation, an intelligent
monitoring system keeps track of
all electricity flowing in the system.
Smart grids can also be used to turn
on selected home appliances or factory
equipment when power is least expen-
sive, or turn them off at peak times
to reduce demand. For a smart grid
to work, the power and flexibility of
the cloud are critical.
The introduction of cloud computing
technology has increased the efficiency
of data management for JEPC and the
way it uses data to improve business
results. The system is more efficient,
flexible and expandable than the old
system. More significantly, employees
now believe it is possible to manage
JEPC’s data in an integrated way for
the first time.
When asked about success factors of
cloud computing, Wang Jijun, Division
Director of JEPC’s IT Center, said
that cloud investments must be well
planned and not treated as a fad.
“A company cannot build a cloud just
for the sake of building a cloud. There
must be a real business need for
installing one.”
Private cloud improves data
management at Jiangsu
Electric Power Company
as many state that the government
should certify cloud service providers.
S
uch steps, which should be done in
close consultation with the local and
international IT industry, cloud users,
and international standards bodies,
will clarify the rules by which organi-
zations must operate and enable them
to move forward with the technology.
Subsidies, incentives and the estab-
lishment of government clouds may be
helpful, but most Chinese IT executives
we surveyed do not consider it necessary.
Set an example by using cloud
computing. By using cloud services to
local agencies, local and national gov-
ernment bodies can set an example
for private industry, and give businesses
confidence in the security and viability
of the technology. It will also provide
the advantages of cloud computing
to government agencies and Chinese
citizens, and help to establish cloud
computing standards and practices.
(For how the US government is using
cloud computing and encouraging the
setting of standards, see “US Policy on
Cloud Computing”)
China’s Pragmatic Path to Cloud Computing
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Figure 17: Support sought from the government
Chinese organizations cite standards, certification, and establishing minimum
requirements as the key steps the government should take to support the adoption
of cloud computing in China.
0 10 20 30 40 50 60 70
Establish cloud security and data privacy standards
Certify cloud service providers
Establish technical standards for cloud computing
Establish and enforce minimum requirements on uptime, recovery time, etc.
Collaborate with other governments and reduce the complexity of compliance requirements
Subsidize cloud infrastructure build out
Offer an accessible national cloud (a cloud built by the government for use by companies)
Provide free access to broadband internet
Provide incentives for replacing existing systems with cloud-based systems
Loosen restrictions on customer or employee data crossing borders
Necessary Helpful
69%
29%
66%
25%
64%
31%
53%
38%
39%
54%
31%
59%
27%
63%
25%
61%
23%
60%
23%
56%
US policy on cloud computing
W
hile China’s unique economic situa-
tion and system requires its own
approach to cloud computing, it can
be helpful to review how the federal
and state governments in the United
States support the new technology.
Cloud computing is now being used at
the federal, state and local government
level. In addition, the federal government
is taking steps to define cloud com-
puting, integrate data using the cloud,
and consider whether to set cloud
computing standards.
Cloud computing has climbed the
US government IT agenda since
President Obama appointed Vivek
Kundra as the Federal Chief Information
Officer in March 2009. One of Kundra’s
initial pledges was to push the govern-
ment to embrace cloud computing.
33
Concurrently, the National Institute of
Standards and Technology (NIST) has
been working to support cloud comput-
ing from an industry-wide perspective.
The 2010 US federal budget states
that: “The Federal Government will
transform its information technology
infrastructure by virtualizing data
centers, consolidating data centers and
operations, and ultimately adopting
a cloud-computing business model.”
34
To this end, Kundra is providing cloud-
based services to federal agencies via
Apps.gov where they can buy cloud
computing applications and services,
i
ncluding business applications, pro-
ductivity software and social media
apps, which meet government security
standards and help agencies make the
most efficient use of IT. The Federal
Cloud Strategy involves the creation
of a distributed cloud that can host
applications, while providing cloud
capabilities for information too sensi-
tive to be placed in a public cloud.
Rather than have each agency rewrite
its own code for cloud apps and face
issues of interoperability, Patrick Stingley,
CTO of the Federal cloud, wants an open
source model facilitating collaboration
between departments and ensuring
that data does not end up in silos.
3
5
NIST, a non-regulatory agency of the
United States Department of Commerce
that performs the function of a national
measurement standards laboratory, has
defined the types of cloud computing,
and created an authoritative list of
the advantages and disadvantages of
using a cloud. The NIST’s Information
Technology Laboratory has also proposed
that it create minimal standards for
data portability, interfaces and security,
which would safeguard users while
leaving room for further innovation.
36
Separate agencies are also starting
their own cloud projects. For example,
the US Census Bureau is using a cloud
application for the 2010 census. The
application, which was installed with-
in 12 weeks, can quickly scale from 20
to 2,000 census agent users with no
additional capital expenditure.
37
China’s Pragmatic Path to Cloud Computing
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These moves will generate confidence
in cloud computing and inspire uptake
a
cross the country. For example,
Google has announced a government-
security standard compliant version of
its Google Apps suite targeted at federal
government agencies that will be
hosted solely within the United States.
38
State and local governments are also
beginning to embrace cloud computing.
Utah and Michigan‘s state CIOs are
preparing to launch public-sector clouds
operated by their central IT agencies
that will serve state-level agencies, as
well as local governments and schools.
Michigan is also considering offering
storage and low-cost hosting for startup
companies.
3
9
New Jersey Transit uses a
commercial cloud provider to run their
call center, incident management and
compliant tracking and service portal.
The system new handles 60 percent
more inquiries than before, with no
new agents and a 36 percent quicker
response time.
40
Government IT leaders are clearly
attracted to the combination of low cost
and improved service offered by clouds.
As Kundra recently said, "By building
these platforms across the board,
[we can]… provide services that are
lower cost, help us cut waste and
actually move the government to focus
on serving the American people rather
than building yet another database."
41
Figure 18: Cloud computing catalysts
88%
88%
84%
81%
80%
79%
78%
Creation of industry clouds (a cloud built by a consortium of companies in an industry)
Adoption by leading companies in your industry
Establishment of standards for cloud-related technologies
Stronger guarantees or protections in contracts and service level agreements
Growing availability of cloud services from domestic vendors
More reliable high speed internet service
Growing availability of cloud services from well known IT vendors and service providers
0 10 20 30 40 50 60 70 80 90
W
ithin the cloud computing market and their own industry, the creation of
industry-wide clouds and adoption by leading companies would most speed up
adoption of cloud computing in Chinese organizations… (Percentage cited as
speeding up adoption)
IT executives at companies
using cloud computing
China’s CIOs have the opportunity to
shape Chinese perceptions about cloud
computing, and to guide their organi-
zations in prudently using the technology.
To do this, they must be effective
communicators and technology leaders.
Become experts on cloud computing,
its requirements and benefits.
CIOs need to become better educated
about the technology, both to satisfy
their own interests and concerns and
to prepare to educate senior executives
about the technology. They should seek
opportunities to learn by attending
events, meeting cloud providers, experts,
and fellow executives with cloud
experience, and reading. They must
balance curiosity about the benefits with
tough mindedness about the risks.
Master the facts necessary to win
executive support. CIOs need to
educate senior executives on cloud
computing. They can start by presenting
evidence that cloud computing signifi-
cantly lowers business or IT costs, as
well as examples of cloud computing
use by leading companies. To win support,
they should prepare an ROI analysis,
keeping in mind that the costs and
returns from cloud computing will
rapidly change as the market matures.
Prepare your organization and
technology infrastructure for cloud
computing. Moving forward on server
and storage virtualization is an important
step, especially for companies that
seek to build private and hybrid clouds.
CIOs must also identify and develop a
plan to address the data integration,
security, networking and other technical
issues. They should add IT architects to
their staffs that have or can master the
details and requirements of the technology,
and put them to work developing a
transition plan from conventional to
cloud computing.
Continually explore the business
potential of cloud computing. IT leaders
should continually seek and develop
innovative new services, and uncover
how cloud computing can be used
to improve and even transform how
business is conducted. They must watch
how other organizations are using cloud
computing, conduct experiments with
the technology, and track potential futures
and scenarios for cloud computing use.
Business executives at companies
using cloud computing
Cloud computing is too important to
leave entirely to technologists. While
the work of migrating from conventional
to cloud computing is likely to fall on
the shoulders of the CIO, other senior
executives have important roles to
play. To make sure an organization
maximizes benefits and minimizes risks,
executives must do the following:
Ask hard questions and demand
data-based analyses regarding cost
savings. Senior executives should not
assume automatic and substantive
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cost savings. They should perform an
ROI analysis with their CIO, and con-
s
ider conversion and ongoing costs as
well as savings. They should also run
experiments or pilots, and be ready to
scale once the benefits are proven.
Establish a clear governance structure
for cloud computing. Many organiza-
tions have rules and structures in
place that govern how IT decisions
are shared between IT executives
and other senior executives. Business
executives should use them (and if
they don’t exist, create them) to decide
who inside and outside the IT organi-
zation should be engaged in decisions
on cloud computing, and what decision-
making rights and responsibilities
they have.
Keep cloud efforts on track. The
organization’s leaders must make sure
cloud computing receives the focused
thinking, planning and follow-up it
requires. They should identify and
address immediate business needs and
longer-term opportunities for clouds,
develop a plan for using public and
private clouds, and track the impact
of clouds on their industry.
Set the standards for success.
Business leaders must make sure goals
and deliverables are well understood,
and projects are well aligned with
business needs. They need to determine
which quantitative and qualitative
benefits are sought, including skills
developed, partnerships established,
and risks addressed.
…while within their organization, strong executive support, evidence of cost reductions
and extensive use of virtualization would do the most to speed up adoption.
0 10 20 30 40 50 60 70 80 90 100
97%
94%
93%
88%
85%
84%
83%
79%
73%
70%
Evidence cloud computing significantly lowers business or IT costs
Evidence cloud computing provides important benefits besides lower costs
Extensive use of virtualization
Stronger executive support for cloud computing initiatives
Better understanding by executives of what is cloud computing
Effective practices for measuring the value of IT
Effective governance practices for making decisions on cloud computing
Encouraging personnel to experiment with free or consumer cloud applications
Plans to expand in foreign markets
Difficulty finding IT talent
Provide the necessary support.
Besides providing financial resources
a
nd technical talent, executives should
support other activities that will
underpin the success of cloud initiatives.
For example, organizations may benefit
from a community of practice or a
cloud program office to develop the
skills and share the experiences of
people engaged in cloud projects.
Buy cautiously, appraise frequently.
It’s too early to predict who the major
cloud providers will be in a few years.
So when selecting cloud providers,
business leaders must carefully consider
whether they have the potential to be
a desirable partner in the future. Even
after choosing partners, they should be
evaluated on their financial stability, as
well as their ability to improve func-
tionality and service levels, to integrate
data across technology platforms
and cloud services, and to deliver on
their promises.
Cloud computing industry
Offer service level agreements and
take other trust-building measures.
The cloud computing industry must
take strong steps to gain the trust
of Chinese executives. This includes
service level agreements, stringent
security standards, and open and honest
communication about outages and
performance. They should also set
realistic expectations about the tech-
nology. For example, response times
may be due to factors beyond the
control of the service providers.
Broaden the range of cloud services.
China needs not only high-quality cloud
s
ervices, but more cloud services.
Partnerships with foreign cloud providers
provide a way to localize world class
cloud technology. Innovative new services
will attract leading edge customers,
and set the path for others to follow.
Participate in the creation of “industry
clouds.” The Chinese executives we
surveyed showed strong interest in
obtaining cloud services from industry
associations or consortiums. While no
industry clouds have yet appeared in
China, industry clouds would have the
advantage of using or setting standards
for exchanging data between companies,
sharing the cost of building a cloud
among multiple companies, and
of establishing the highest possible
security standards.
Publicize cloud computing success
stories: Most Chinese enterprises will
be reluctant to adopt cloud computing
without examples of successful use.
Cloud service providers, associations
and academics should make these
examples known to the business com-
munity through credible case studies
of Chinese and foreign companies.
China’s Pragmatic Path to Cloud Computing
32 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
A Tipping Point
China has much to do and much to
learn from other nations before it can
fully exploit the potential of cloud
computing. But other nations have a
great deal to learn from China as well.
China’s careful approach to cloud
computing will undoubtedly prevent
organizations from moving too quickly
to adopt a “hot” technology, and putting
their organizations, customers, partners
and even the nation at risk. The part-
nerships between local governments,
domestic IT vendors, and leading
foreign companies could well prove a
model for providing cloud computing
services in developing nations.
China has demonstrated an extraordi-
nary ability to move forward rapidly
with large-scale infrastructure invest-
ments when it reaches a consensus.
China’s universities are turning out an
enormous quantity of technical talent.
If government, users, and providers
take the appropriate steps, China will
quickly reach a tipping point of rapid,
beneficial cloud computing activity.
China may appear by some measures
to be lagging behind other countries
in cloud computing today, but well
before the end of the decade it could
be a world leader.
There is an urgent need for the government and
organizations to push forward the establishment of
technology standards. This will require a joint effort
of consultants, integrators, vendors, institutes and
government.”
— Ding Tao, IT executive, Shenhua Beijing Guohua Electric Power Co., Ltd.
“
IT executive
CIO or CTO
Chief IT architect or strategist
CFO, COO, Chief Strategy Officer
Chairman, president, CEO
Academic researcher
36%
55%
2%
2%
5%
1
%
70 billion RMB or more
3.5 billion – 69 billion RMB
1 billion – 3.5 billion RMB
Less than 1 billion RMB
83%
4%
11%
2%
How the study was conducted
T
his study is the result of a collaboration
between the Accenture Institute for
High Performance and the Chinese
Institute of Electronics’ Cloud Computing
Expert Committee (CIE). Using questions
developed by the Institute with input
from the CIE, 103 IT executives and
five academic researchers from major
Chinese enterprises, government
agencies, and universities were surveyed
in October and November 2009.
Accenture simultaneously surveyed
201 IT executives and other senior-
executive decision makers in the
United States and between 50 and 60
(per country) in Australia, Brazil, France,
Germany, Japan, Singapore, and the
United Kingdom. Altogether, the 674
respondents of our global survey came
from over 20 different industries and
government or non-profit sectors.
Respondents were screened and invited
to participate by email and telephone,
then completed the survey on a secure
web site. They were only included in
the final tally if they are involved in
their organization’s use or exploration
of cloud computing, and have at least a
basic knowledge of cloud computing.
Within China, 85 percent of respondents
are state- or privately-owned businesses
with annual revenues (or budgets, in
the case of public-sector and nonprofit
organizations) above 3.5 billion RMB
(approximately US$ 500 million). The
other 15 percent are split between
companies with revenues above and
below 1 billion RMB (US$ 150 million).
Outside of China, organizations with
revenues as low as 1 billion RMB
were included only in Australia, Brazil
and Singapore.
China’s Pragmatic Path to Cloud Computing
33 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
Figure 19: China respondents
By industry
Electronics and high tech
Energy
Automotive and industrial equipment
Healthcare services
Consumer goods and services
Transportation and travel services
Capital markets
Chemicals and natural resources
Communications
Retail
Health and life sciences products
Utilities
Professional services
Banking
Post and shipping
Insurance
Other
14%
13%
11%
7%
6%
6%
5%
5%
4%
4%
4%
4%
3%
2%
2%
1%
12%
0510 15
B
y job title
By company size
China’s Pragmatic Path to Cloud Computing
34 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
About Accenture Greater China
A
ccenture is a global management
consulting, technology services and
outsourcing company. Combining
unparalleled experience, comprehensive
capabilities across all industries and
business functions, and extensive
research on the world's most successful
companies, Accenture collaborates
with clients to help them become
high-performance businesses and
governments. As a Fortune Global 500
company, Accenture has more than
181,000 people worldwide serving
clients in over 120 countries. The
company generated net revenues of
US$ 21.58 billion for the fiscal year
ended Aug. 31, 2009.
Accenture has conducted business in
Greater China for more than 20 years.
Today, it has more than 4,200 people
working in Greater China, throughout
offices in Beijing, Shanghai, Dalian,
Guangzhou, Hong Kong and Taipei.
With a proven track record, Accenture
is focused on leveraging local best
practices and successes, and is dedi-
cated to delivering premium client
value and results. Accenture helps
clients define strategy, streamline
business processes, integrate systems,
promote innovation and enhance
overall competitive advantage to
ultimately attain high performance.
About the Accenture Institute
for High Performance
The Accenture Institute of High
Performance creates strategic insights
into key management issues and
macroeconomic and political trends
through original research and analysis.
Its management researchers combine
world-class reputations with
About the authors
A
llan E. Alter (allan.e.alter@
accenture.com) is a research fellow
with the Accenture Institute for
High Performance, and is based in Boston.
With Jeanne Harris, he is the author
of Six Questions Every Executive
Should Ask about Cloud Computing
(Accenture, 2010). He was formerly
an editor with such publications as
MIT Sloan Management Review,
CIO Magazine and Computerworld,
and has written on IT in China for
CIO Insight.
Yali Peng (yali.peng@accenture.com)
is a senior research fellow with the
Accenture Institute for High performance,
and leads the Institute’s Beijing team.
He has published widely in Chinese
business journals and media.
Lin Runhua (lin_runhua@
ciecloud.org.cn) is the deputy secretary
general of the Chinese Institute of
Electronics, and the secretary general of
its Cloud Computing Expert Committee.
He was formerly the general manager
of Ziff Davis China, the editor-in-chief
of PCWorld, and deputy editor-in-chief
at China Computerworld.
Jeanne G. Harris (jeanne.g.harris@
accenture.com) is a senior executive
research fellow with the Accenture
Institute for High Performance, and is
based in Chicago. She is the co-author,
with Thomas H. Davenport, of
Competing on Analytics: The New
Science of Winning (Harvard Business
Press, 2007) and, with Davenport and
Robert Morison, of Analytics at Work:
Smarter Decisions, Better Results
(Harvard Business Press, 2010).
Accenture’s extensive consulting,
technology and outsourcing experience
t
o conduct innovative research and
analysis into how organizations
become and remain high-performance
businesses.
About the Chinese Institute
of Electronics
The Chinese Institute of Electronics is
an academic and non-profit organization
affiliated with the Chinese Ministry of
Industry and Information Technology.
It is composed of professors, experts and
companies in the field of electronics
and technology. The aim of the CIE is to
promote electronic science and tech-
nology by stimulating and encouraging
the development and application of
these fields, strengthening co-operation
in electronics with scholars of all
countries, popularizing electronic science
and technology and encouraging
education and training for engineers.
The Chinese Institute of Electronics
was founded during the inaugural
meeting in 1956 and became an
independent academic body in 1962.
It has 100,000 individual members,
more than 600 organization members,
44 regional societies and 8 working
committees. Since the beginning of
1980's, CIE has established relationships
with famous international electrical
and electronic societies. In 1980 and
1984, CIE was admitted as a full
member in the International Federation
for Information Processing (IFIP) and
a full member in the Union Radio-
Scientifique Internationale (URSI),
respectively. CIE has also established
relationships with ICCS, IMIA, IEEE,
IET, ISAP and IEEK.
About the Cloud Computing
Expert Committee
The Chinese Institute of Electronics
Cloud Computing Expert Committee
was established in November 2008
to promote research, development
and application of cloud computing
technologies in China. The Committee’s
membership includes over 30 well
known experts from China and abroad.
The Committee tracks the latest
developments in cloud computing
technologies and enhances exchanges
and cooperation on cloud computing.
It also promotes the development of
cloud computing standards and provides
government institutions and industry
with proposals for the advancement
of cloud computing. The Committee is
t
he organizer of the First International
Cloud Computing Seminar and the
First China Cloud Computing
Convention.
Acknowledgements
The authors wish to acknowledge the
contributions to this report by Zhang
Yimin of the Chinese Institute of
Electronics, and Henry Egan, Katharine
Hirst, and Richard Li of the Accenture
Institute for High Performance.
China’s Pragmatic Path to Cloud Computing
35 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
Notes
1 “Chengdu Opens Cloud Computing Center,”
www.hexun.com, 29 December 2009; “IBM
Opens Cloud Computing Laboratory in Hong
Kong,” PR Newswire, 10 December 2009;
“Joyent Inc. Launches the First Commercial
Cloud Computing Platform in China,” China
Weekly News, 10 November 2009; “IBM to
Build Cloud Computing Platform for Beijing,”
www.tradingmarkets.com, 14 December 2009;
梁念坚：2010年微软重点在华加大
云计算投入, http://it.chinabyte.com
2 “China Mobile Brews Cloud Computing
Platform,” www.c114.net, 2 June 2009;
“Chinese Companies Create Cloud Computing
Committee,” ChinaTechNews.com, 26 January
2010; Jing Li, “NTT to Enter Cloud Computing
Market in China,” IHS Global Insight Daily
Analysis, 5 January 2010; PR Newswire, ibid;
China Weekly News, ibid.
3 China Internet Network Information Center,
www.cnnic.net.cn; 24th Statistical Report on
Internet Development in China, CNNIC, July
2009; “Over 700 million mobile phone users
in China,” People’s Daily Online, September 03,
2009; Rocky Fu, “China Online Shopping Report
2009,” China Internet Watch, December 7, 2009.
4 CNNIC Report, ibid
5 David Katz, “Tech Titans Building Boom,”
IEEE Spectrum, February 2009; Maija Palmer,
“Where the Internet Lives,” Financial Times,
November 17, 2009.
6 Luiz André Barroso and Urs Hölzle, The
Datacenter as a Computer: An Introduction to
the Design of Warehouse-Scale Machines
(Morgan & Claypool Publishers, 2009).
7 IDC Worldwide Black Book, February 3, 2010.
8 IDC eXchange, “IDC’s New IT Cloud Services
Forecast: 2009-2013 (http://blogs.idc.com/
ie/?p=543), October 2009; “SaaS Market size in
2008,” CCW Research, 2008; “China’s SaaS
Market Forecast,” CCW Research, 2009.
9 Ron Condon, “The Opportunities and Risks of
Cloud Computing Services,”
SearchSecurity.co.uk, February 23, 2009.
10 Gray Hall, “Bechtel Harnesses the Cloud: Case
Study of an Enterprise Cloud,” cloudstorages-
trategy.com, March 12, 2009; Mache Creeger,
“CTO Roundtable: Cloud Computing,”
ACMQueue, June 2, 2009.
11 Accenture Technology Labs, ibid.; Galen
Gruman, “Early experiments in cloud comput-
ing,” InfoWorld.com, April 7, 2008; “AWS
Case Study: Harvard Business School,"
aws.amazon.com/solutions.
12 “Restaurant Chain Boosts Customer Loyalty
with Social Networking and Cloud Computing,”
www.microsoft.com/casestudies;
99designs.com; “AWS Case Study: 99designs”,
aws.amazon.com/solutions.
13 Accenture Technology Labs, ibid.
14 Accenture Technology Labs, ibid.; “The State
of Cloud Computing in Japan,” CIO.com,
November 5, 2009; “SingTel to Help Establish
Singapore as a Regional Cloud Com putting
Hub,” SingTel press release, July 14, 2009.
15 Accenture Technology Labs, ibid; Eurocloud
web site, www.eurocloud.org.
16 Gartner, “Hype Cycle for Cloud Computing,
2009,” 16 July 2009 (Report #G00168780).
17 China Mobile Institute, 2010,
labs.chinamobile.com; China Mobile Enters
Sphere of Cloud Computing,” Interfax,
November 17, 2009.
18 www.alisoft.com; Cloud computing in
China, White Valley partner,
www.whitevalleypartners.com; ZDnet China,
创新与安全：云计算的两只跷跷板 2
February 2010, security.zdnet.com.cn; “Alisoft
to spend $146mln to market its software,”
Reuters.com, March 31, 2009
19 “Chinese companies create cloud computing
committee,” China Tech News.com, Jan 26, 2010.
20 Windows Azure forum,
http://social.msdn.microsoft.com/Forums;
it.chinabyte.com, ibid.
21 Andy Greenberg, “IBM’s Chinese Cloud City,”
Forbes.com , July 27, 2009; “Wuxi builds
engine for economic growth with cloud com-
puting solution from IBM,” www.ibm.com, 09
December 2009.
22 “IBM to Build Cloud Computing Platform
in Beijing,” www.tradingmarkets.com,
14 December 2009; “IBM Opens Cloud
Computing Laboratory in Hong Kong,” PR
Newswire, 10 December 2009;
23 “Joyent Inc. Launches the First Commercial
Cloud Computing Platform in China,” China
Weekly News, 10 November 2009.
24 “Joint Venture with Yucheng Technologies,”
NTT Data Corporation press release, Jan. 4, 2010.
25 Dell and Infobird to provide Cloud Computing
in China, 2010, www.cncloudcomputing.com.
26 Paul F. Nunes, Susan A. Piotroski, Lay Lim Teo
and R. Michael Matheis, “Seven lessons for
building a winning brand in China,” Strategy &
Leadership, Vol. 38, No. 1, pp. 42-49.
27 According to a report on IT in China by
Gartner, “Server virtualization has met with
wider acceptance in China during the past few
years. Increasing concern over China's heavy
energy consumption is a major driver
of growth in IT; as a result, production cases
for server virtualization are proliferating.
However, other types of virtualization—such as
application virtualization and desktop
virtualization—are still in their infancy. China is
several years behind mature markets in adopt-
ing virtualization technology in x86 servers.
Implementation has remained at low levels
and has been confined mostly to large enter-
prises. Most midsize and large enterprises that
Gartner surveyed prefer to wait on the side-
lines until the technology matures.” “Emerging
Market Analysis: IT, China, 2010 and Beyond,”
Gartner, 12 April 2010, ID Number G00175196.
28 CNNIC Report, ibid.
29 This policy was summarized in the document,
“The National Strategy of Informatization
2006-2020” released by the Central Party
Committee and the State Council in May 2006.
30 创新与安全：云计算的两只跷跷板,
security.zdnet.com.cn, 22 February 2010.
31 “Update: Dell and Infobird Sign MOU to
provide Cloud Computing Solution in China,”
PR Newswire-Asia, January 8, 2010.
32 “IT plan calls for big spending, jobs,” JoongAng
Daily, February 2, 2009.
33 “President Obama names Vivek Kundra
Chief Information Officer,” March 5, 2009,
www.whitehouse.gov; Saul Hansell, “The
Nation’s New Chief Information Officer Speaks,
http://bits.blogs.nytimes.com; March 5, 2009.
34 FY2010 Federal Budget, Analytical Perspectives,
Cross Cutting Programs; www.whitehouse.gov.
35 “Snapshot: Cloud Computing,” Federal Computer
Week, www.FCW.com/CloudComputing
China’s Pragmatic Path to Cloud Computing
36 | Accenture Institute for High Performance | Copyright
©
2010 Accenture. All rights reserved.
36 NIST, “Effectively and Securely Using the
Cloud Computing Paradigm,” Presentation by
Peter Mell and Tim Grance, October 7, 2009;
http://csrc.ncsl.nist.gov.
37 NIST, ibid.
38 Government Technology, “State CIOs Offer
Government Cloud Option,”
www.govtech.com, January 24, 2010.
39 Government Technology, ibid; Steve Towns,
“Michigan Plans New Data Center and
Government Cloud,” Government Technology,
September 2, 2009, http://www.govtech.com.
40 NIST, ibid.
41 Jennifer Swift, “Kundra reiterates focus on
cloud computing,” The Hill, April 7, 2010.
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