China Cloud Computing Presentation

Cloud Computing Services Business Assessment

For Dell Services ChinaPrepared By

Bo Hershey, NYU ShanghaiJuly 2011

Agenda

• China: Economy in transition• Cloud Computing, an emerging technology

trend • Key Technology Service Players in China• Recommendations for Dell, capitalizing on

Cloud Computing in China

Economic Growth in China, the World’s Largest Emerging Market

• GDP Growth- Last Six Years• 2004: $1.97 trillion. The sixth largest economy in the world.• 2005: $2.32 trillion• 2006: $2.7 trillion • 2007: $3.43 trillion• 2008: $4.42 trillion• 2009: $4.9 trillion• 2010: $ 5.89 trillion. The world second largest economy.• What is Next?

– Can the growth continue at the current 10% rate? – Will China’s transition from a export driven economy to a domestic

consumption based economy provide a platform for continued GDP expansion?

China’s Economy has been Export Driven• Leading exporter providing cheap goods to

the developed World. • Large trade surplus– Pre-Financial Crisis: Huge increase in Trade

Surplus• 2004: $66.9 billion• 2005: $101.9 billion• 2008: $300 billion

– 2008 Financial Crisis: Negatively effected exports. Two years after: • 2010: $183.1 billion

China’s Economy is in Transition

• Infrastructure Investment in Urban Centers. • Wealth Expansion through Real Estate

Investment• Rising Yuan • Growing Educated Urban Middle Class • Domestic Consumer Based Economy is

Emerging

Infrastructure Investment is moving into the Interior

• Urban Population: 700 million people and growing– Further expansion is needed to meet the demand of future

generations. Second and Third tier cities are being built.

• Megacities- Centers of Politics, business and media. These cities are market leaders.

• Shanghai: Financial Center. The Wall Street of the East. • Beijing: Political Capital. Heart of China. • Guangzhou and Shenzhen: Pearl River Delta. Center of Chinese Industry.

Highest population density in China. • Chongqing: Resource Rich and Heavy industry. The Wild West of China. • Chengdu: Western China. Expanding Industry base to provide access to

low cost labor and real estate.

Futuristic Cities

Shanghai, next Wall Street of Asia.

Guangzhou, export manufacturing center

Chongqing, a model for in-land cities

Real Estate is Creating Personal Wealth

• Major indicator of Health of Chinese Economy– Has been growing in the last few years. – Much Chinese wealth is tied up in real estate market. – Wealth Effect is driving consumption.

• Multi-Billion Dollar Asset Value– Shanghai and Beijing: Heart of the Real Estate Boom

• Some three bedroom apartments are going for $1 million. • Commercial Real-estate: sought after by many businesses.

– Would not invest in commercial real estate. Too much uncertainty of where it might go.

– Huge frenzy to grab land in China.• Lots of borrowing and lending.

• Possible Real Estate Bubble – Government is now raising interest rates and restricting access to capital to restrict

speculation

The Rise of the Yuan• RMB vs. US Dollar

– Appreciation is trending @ 3-5% per year. – Foreign countries are pushing China to let the Yuan rise– Government is trying to balance relatively lower Yuan Positive impact on

export growth and contribution to domestic inflation• Foreign Currency Reserves:

– $3 trillion. Having a hard time deploying cash.• Export Products will become more expensive in the coming years.• In the past it has been undervalued. Has made products cheaper for

the developed world. – 1990’s: $1= 8.1RMB– 2005: $1=6.5RMB – 2011: $1=6.47. This is the highest it has been since 2004.

Next Generation Urban Middle Class

• Born after 1980. – Ages 20’s-30’s: First generation to benefit from the growth

made by the older generation– Lived under the new prosperity. Know nothing else– Witnessed China develop its cities and economy – What they do in the next 10 years will define the economic

success of China • Large Talent Pool: 6.6 million college graduates in 2011.

– Job market is very competitive– Tech-Savvy– Brand Conscious

The Future Workers of China

Part of minority of lucky Chinese who graduate from college. Are they ready to work? Does going abroad make you more qualified?

China’s Consumer Based Economy is Emerging

Largest computer market. 442,000,000 internet users

886,300,000 cell phone users.

70,000,000 Registered cars Spent $10,000,000,000 on Luxury Goods in China and $50,000,000 ,000 abroad.

A Summary of New China

• China will continue to grow rapidly and at a faster rate than the mature economies of the Americas and Europe for the foreseeable future

• The growth of tier 2 and 3 in-land cities is becoming the source for the next wave of growth.

• With a population of over a billion people the country has a workforce to meet the demands of a global market and to drive a consumption based domestic economy.

• Implications for IT Services Business and Cloud Computing is promising.

Agenda

• China, Economy in transition• Cloud Computing, an emerging technology



Cloud Computing • Clouds: Virtual Servers that provide an efficient way to transfer and

store data and applications. – Benefits include lower cost with storage and computing flexibility– Provides a variable consumptions and cost model for the customer– Allows users to have access to remote data and applications anywhere in the

world

• Cloud Computing Models– Public: Open to anyone. Shared network that allows for collaboration of ideas– Private: Personal network. Hosted in private data centers provided by 3rd party

providers– Hybrid: Combines public/private cloud with traditional IT infrastructure

provisioning( In house or Outsourced)

Cloud Computing in China is very new and not well understood

• Information Technology market is still developing. – Most still are focused on traditional in-house servers.

• Many companies are still learning. Need to be educated on the benefits of updating IT infrastructure.

• Clouds computing is a new technology. – Only a few organizations have adopted it.– Government is the main leader in Cloud Computing.– Large enterprises have also begun using it.

• Ex: Xiwang Group, Jiangsu Electric Power Company, China Ocean Shipping Company

• Most Chinese organizations are waiting for more information on Clouds. – Don’t understand how Cloud Computing works.

Current State of Cloud Computing in China

• Cloud technology is new. – Not popular with local companies.– There is very little knowledge of the technology. – Could take many years for it to be known and accepted.

• Cooperation with the government is needed.– It is a sign of approval in the eyes of Chinese companies.– Government is helping test Cloud technology.

• Future usage is expected. As government and large private enterprises adopt, smaller companies will follow. – Security concerns need to be addressed. – Data Privacy needs to be ensured.

Barriers to Cloud Computing Adoption in China

• Government endorsement and partnership is important.

• Cost of building data centers is expensive.– IBM facility in Beijing will be done by 2016, a five

year project. • Security and data privacy concerns most be

overcome. – Internet services can be prone to hacking. – Need to provide services that protect a client’s data.

Target Market in China• Government Agencies: Many are using the technology or will be using in the future.

– Success provides evidence that technology works. – Government contracts insure success in China. – Dealing with the government is different than in America.

• Need to know the right people. • Willing to follow rules of the country.

• Major State Owned Enterprises: Corporate organization that have relationships with the State.– Can be a good reference to other companies. – Second biggest market for updating IT infrastructure.

• Private Enterprise: Local companies are the key to success in China. – Need to update IT infrastructure. – Want to be more competetive and cut costs. – Waiting for the right moment

Agenda




Technology Service Providers in China

• Foreign Firms- Leaders in Global Market. – Large Multinationals.

• Chinese are brand oriented. They know companies like Dell, HP and IBM. Want services from brand leaders.

– Have been moving into the Chinese market.– Starting along the coast.

• Moving in-land to the untapped economy. – Dominate competition in the Cloud Market.

• Local Chinese Firms- Growing role in IT industry. Are in their infancy. – Working with foreign firms. – Creating partnerships with foreign firms. – How will these partnerships develop?

The Big Guys in China

…And More!!!

• Overview– Largest Information Technology Company in China. – Have offices in every major city in China.

• “not a technology company but a company that uses technology to solve problems”– Innovative.

• Think outside the box. What is next? – Look to the future. Grab market before others.

• “Global Technology Outlook”: It is about being ahead of the competition.

• Major player in Chinese IT market. – Provide Hardware, Software and Services. – Have connections with leading politicians and businesses in China.

Understand the importance of building connections. “Guanxi”

IBM on Cloud Computing

Position in China: One of the early movers– Have been building data centers throughout China.

• Ex: They are helping Range Technology, Chinese software company build a cloud computing center near Beijing.

• Looking to expand services in government sector. – Beijing data center will be the largest in China.

• Will be completed in 2016. – Provide services to Government agencies and private

industry. • Have the trust of leading agencies and business organizations

• Has been following the IBM path.– Focus on Hardware, Software and Services.

• Trying to strengthen its software and services business. – Moving away from consumer electronics.– Margins for PC’s and printers are too low.

• Has been in China since early 1990’s under EDS.– They have seen how the industry has changed. – Information Technology Services goes back to pre-HP.

• Wants to be more competitive in China. – Trying to diversify its various businesses. – Create products and services that meet the needs of local market– Aspires to be an IBM alternative in Services.

HP on Cloud Computing Growing interest in Cloud Computing: Concept is still

developing.– Uses unique HP features and software. Only takes a few minutes to set

up.• Able to create new networks.

– Big feature is the mobile capabilities Clouds provide. Access anywhere with broadband internet connection.

– Want to help connect a company with their workers. “Global Worker”– Reduce consumption of energy. Green technology. – Affordable. Does not cost much to create and implement. – HP Cloud Consulting Services: Helps create a cloud network. – Instant On Enterprise: Embeds technology into everything a client

does.

• Information Technology Consultants: Provide advice and connections. – Are not a hardware and software company. Sell own services and

other company products to clients. – Might be less competitive in the future. – Need others to create products.

• Accenture in Greater China– Focus on outsourcing opportunities. Very aggressive.

• Provide IT help to local clients. • Work with clients to develop strategies that give the company an

advantage in the local market.• Seek employees who can tackle the challenges of China.

Accenture on Cloud Computing

Help implement Cloud Computing technology. Do not create the software and hardware but provide the service. – Look at the technology as a form of outsourcing. – Outsourcing component might be to companies

advantage. • Business Process Utility: Allow a company to capture or launch

into the market quickly. – Custom experience:

• Allow clients to build and maintain cloud. • Deliver enabler. Speed up time and stay on budget.

• World’s largest software company. – Has the capital to be competetive.

• Has been involved in China since the early 1990’s. – Learned that experiences in America do not work. – China is a different world. Expect different product:

Cheaper and fits the standards of the market. • Needs to work with local industry. • Has relationships with Chinese software companies.

– Has a strong relationship with Chinese Government. • Uses relationship to advance the IT industry in China.

Microsoft on Cloud Computing

Cloud Computing is a new technology that the company has been pushing. – Microsoft Azure: Service through the internet.

Able to use Microsoft products with ease: Bing – Does not require extensive IT infrastructure. – Uses Microsoft oriented products.• Very much a Microsoft product. • Is being used by many Cloud Providers like Siemens and

HP.

• Business software and hardware company.– Provides infrastructure for companies to succeed.

• Has been in China since the 1990’s– Focused on helping make business in the region

more efficient. – Very much a software company, now expanding

into hardware with the Sun acquisition – Always trying to sell its own software. Cares only

about Oracle products.

Oracle on Cloud ComputingHas the ability to be competitative in the Cloud Market. – New technology: Still is being tested to see what are the best methods.– Want to find how they can make their software more easily accessible. – Focused on primarily Oracle products(hardware and software). Leaves

little room for others. – Does not care about creating cloud network. Cares about creating a

network that changes the way Oracle applications are delivered. Moving away from silo based model.

– Servers will still remain important feature of many companies business. – Most information will still be on servers.

Moving toward cloud based model.– Sees it as the future. Finding ways to incorporate it into the system

• German Corporation – Believes Cloud Computing is an important technology.– Creates solutions tailored to industry specific requirements.

• Functionality and Security: Allow for greater communication in industry related topics.

• Cloud Computing: Form of Communication. Public oriented.– Meant to improve content creation – Allows for collaboration. – Enables easy sharing no matter where in the world. Just need internet.

• Next three years it want to double market share of communication: currently 7%

• In China: – Siemens wants to enter second and third tier cities in the next few years.– Believes there is a lot of potential in new cities. Newest emerging markets in

China.

Siemens on Cloud Computing

Cloud Computing: Form of Communication. Public oriented.– Meant to improve content creation.– Seen as a way to better communicate. – Allows for collaboration.

• Public clouds: With others in the Industry.• Private Clouds: Allow for in-house debate.

– Enables easy sharing no matter where in the world. Just need internet.

– Siemens is not a software company. Uses Microsoft products.

• Hong Kong based Information Technology company– IBM of China– China focused. – No presence abroad.

• Largest domestic provider of Information Technology services. – Helps implement technology.– Similar to Accenture. Consulting based.– Provides a local perspective.

• Works with both foreign and Chinese companies. • Has the potential to be a future leader in China.

– Due to loyalty of Chinese companies. • No data available on Cloud Computing offerings.

Agenda


trend • Key Players in China• Recommendations for Dell capitalizing on


• Has the corporate structure similar to HP and IBM– Provides Software, Hardware and Services.

• Should use these to be more competetive and on the same level as major information technology companies.

– Brings over that same sense of cohesiveness to China.• Market is still very open. Dell has the opportunity to be competetive in the

Chinese services market with Cloud as a new foundational offering

• Cloud Computing is a strategic focus for Dell that would provide a platform for gaining a leadership position in the China market place.

• Has the brand name the Chinese know and trust– Needs to further leverage the global reach of the

brand.

Recommendations for jump starting cloud computing in China

• Cloud Computing is in its infancy in China. No one is a market leader. Near term, Dell Services should: – Create Cloud Strategy Consulting team to drive market awareness

and demand for Dell Cloud Computing Solutions.• Also can provide valuable feedback loop from customers for strategy

refinement.– Educate local companies.

• Provide information sessions for executives. Show them what others are doing.

• Work with Clients to transition.– Establish partnerships with local software/services companies. – Target anchor customers (large public/private enterprise) to build

out cloud computing infrastructure

Documents

China Cloud Computing Presentation