Cloud Computing in China's FSI

Written by Anthony Xu || 01 Dec 2010

As the world economy recovers from the deep hole of the financial crisis, institutions in Chinese financial markets, like their counterparts in the west, are looking for ways to improve their efficiency through technology. This drive for efficiency is bringing Cloud computing into the spot-light and the idea that computing will increasingly be delivered as a service, over the internet, from the vast warehouses of shared machines – a new way to meet the demand for efficiency improvement.

Using Cloud to Improve Efficiency

The Global Financial services industry is, by its very nature, volatile and China’s is no different. As recently as 2002, many Chinese banks were nearly insolvent. Although conditions have improved and most Chinese banks avoided the recent troubles of their western counterparts, there are still challenges ahead both internally and externally to the banks.

In such an environment, managing risk is key. Banks are looking to get more from their assets including cash and technology. Cloud computing offers financial institutions a quick and efficient way to expand while still keeping a handle on their IT investment risk. Take for example the quickly expanding rural banks of China. While they open hundreds of branches in west rural areas, their IT infrastructure is under huge pressure. Cloud computing both through public and private clouds, gives banks a viable solution to enable that expansion and at the same time, manage the risk.

In more traditional banking markets in China, rising personal income is driving demand for more complex financial products and services. To meet this demand, Insurance, security and Fund Management companies all need to increase their IT investment; many are turning to cloud computing.

Latest developments

As compared to the industry in more developed markets, China’s cloud computing industry is still relatively new, but is developing quickly. Customers are becoming more familiar with the concepts of cloud and successful deployments have caught IT managers’ attention.

Foreign vendors are largely responsible for the acceleration and acceptance of cloud computing as they push the latest technology into the market. VMware, one of the leading companies in virtualization technology, has successfully deployed their products in Banks, Insurance and Securities Companies like China Pacific Insurance. Microsoft, which advocates both private and public cloud, rolled out their new Windows Azure and has setup an innovation centre in Shanghai dedicated to cloud computing. IBM is focusing on introducing the Blue Cloud platform across the country. Finally, public cloud SaaS solution providers like Salesforce.com have entered the market and gaining momentum within small companies.

Local providers have also been getting involved in the market primarily through two different strategies. Some have setup partnerships with foreign vendors, such as IBM in the case of UFIDA, to explore the China market. Other small ones like ‘800APP’ and ‘XTools’ provide the same CRM services as their foreign competitors, but their services are adjusted to be more suitable for Chinese customers and provide more local support.

Government policy

As cloud computing evolves in China, it has caught high level government attention. In October 2010, The Ministry of Industry and Information Technology of the People’s Republic China and The National Development and Reform Commission published a note supporting innovation in cloud computing and decided to set up innovation centres in five cities; EMC has already moved into the first centre in Shanghai which opened in August 2010. Provincial and local governments are also promoting Cloud. Shanghai, for example, has budgeted a three year 31.2B RMB plan for 13 cloud computing projects. The Wu Xi government has cooperated with IBM to build a large cloud computing centre and using tax credits to attract more startup companies to the centre.

Although many of these developments have been positive, institutions in China are still heavily regulated by government, which is large obstacle for the quick adoption of new technologies.

Conclusion

Although, largely still viewed by IT managers as not secure enough for their core systems, virtualization technology has begun to be widely used to improve the internal data centre efficiency which could be considered the basic foundation for future cloud computing initiatives. As more leading IT companies introduce the concept and product into the market, the cloud computing market in China will rapidly expand to match and eventually surpass western markets.

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