It’s big business. But simmering cybersecurity tensions between China and the US could spell trouble for the industry.
For years, China has lagged while the rest of the world raced to embrace cloud computing.
Wasteful investments, hodgepodge standards, and a regulatory regime hostile to foreign players have hindered widespread adoption of the technology, which in America now powers everything from Google Drive to iTunes and DropBox.
But this year, things have finally started to change.
In February, Microsoft announced it would partner with 21Vianet, a local company, to sell cloud services to Chinese consumers, making it the first major foreign player to break into China’s domestic market. A few months later, IBM said it was also pursuing a joint venture.
Hailing Microsoft’s move as “the start of a new era,” Charlie Dai of tech research company Forrester predicted that “a new chapter of cloud is going to be written by a new ecosystem in China’s market, and Microsoft will be the leader of this disruption.”
Dai argued that Microsoft’s example would shake up the relatively sleepy competition among China’s domestic tech companies, “trigger customer awareness and investment,” and lead to an upgrade of the cloud ecosystem in China.
The rewards for companies that can ride the wave of cloud computing in China are sizable.
Beijing is investing $1 billion to accelerate development of the industry, which is expected to grow 40 percent annually over the next several years. By 2015, the market for cloud services in China is expected to be worth between $122 billion and $163 billion, according to the China Software Industry Association.
The problem? Just as foreign companies have started to cash in, analysts are warning that simmering cybersecurity tensions between the China and the US could spell trouble for the industry.
According to a new report, tech companies that take on Chinese partners run the risk of exposing themselves and their customers to hacking and espionage on behalf of the People’s Republic.
“Any future growth in US consumer use of China-based cloud computing infrastructure would likely raise significant security concerns,” say the authors of “Red Cloud Rising,” a report published by the US-China Economic and Security Review Commission.
One of the report’s biggest concerns is data security.
In cloud computing, packets of data are stored and passed between large numbers of computers. If American citizens’ data is stored on a server in China, the report notes, it could become vulnerable to surveillance or could even be surrendered to the Chinese government, when requested.