Cloud Migrations in China
Digital transformation is driving the rapid development of China's public cloud market. Enterprises have accelerated the speed of cloud adoption. They are also moving towards hybrid/multi-cloud deployments such as private Cloud, dedicated Cloud, and edge cloud. International Data Corporation estimates China's whole cloud market (including Cloud as a Service, cloud-related IT services, and cloud infrastructure construction) to have reached US$63.7bn in 2021.
Consumption weakness and regulations could slow internet cloud service players' (CSP) growth. Internet CSP's growth is expected to fall relative to non-internet players. Non-internet CSP will likely gain a share on enterprises, SOE, and government cloudification.
Carrier-neutral/carrier Internet Data Centres growth will be driven by enterprise digitalisation and "East Data, West Computing." Carrier-neutral IDCs are expected to benefit from customer/regional diversification as they expand in the West. Carrier-IDCs leveraging their strong track record in the West may make them more competitive in their service offerings. A stable competitive landscape could benefit the established providers.
SaaS is expanding from horizontal to industry verticals, focusing on large enterprises/KA. Enterprise resource planning (ERP) may lead the horizontal software space due to better growth visibility. Large enterprise business offerings would help offset market volatility given weak macro factors. ERP players are developing modules and solutions for verticals like manufacturing, semis, and real estate-specific offerings to increase barriers to entry.
A new normal of increased adoption of Work From Home post-pandemic continues to drive online applications. Still, enterprise digital transformation provides long-term opportunities such as industry verticals expanding beyond the internet to public service, transportation, media, finance, manufacturing, healthcare, etc., with supportive government policies. Also, regulatory uncertainty is driving hybrid multi-cloud adoption.