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Issue 44, March 2012

This newsletter is a monthly supplement to ChinaAnalysis.Com, providing up-to-date analysis about China-related issues.

ChinaCompass Featured Article

Indigenous Innovation Drives China's Cloud Computing Industry

Dongxu Li

Since the concept of "Cloud Computing" was introduced in 2007, the cloud computing industry has become a new source of economic growth in China. With a growing number of cloud computing service providers, solution providers, system integrators, infrastructure and devices providers, a dynamic cloud computing ecosystem is gradually forming. Chinese indigenous innovators have played a critical role in leading this technological transformation. In the process they have built up a participatory cloud computing industry chain in China.

The Chinese government has placed great emphasis on the development of indigenous cloud computing. In 2010, cloud computing was listed as one of the new strategic industries in China's 12th Five-Year Plan. The Chinese government has initiated several cloud computing bases in Beijing, Shanghai, Shenzhen, Dongguan, Suzhou, Hangzhou, Wuxi, Chengdu, Chongqing, Ningbo, Qingdao, Jinan, Tianjin, Langfang and Foshan. To provide financial support, China's National Development and Reform Commission established a Cloud Computing Special Fund which, as of October 2011, had made an initial investment of 660 million RMB in 15 pilot projects in Beijing, Shanghai, Shenzhen, Hangzhou and Wuxi. Local governments are also providing active financial support to indigenous companies. Shanghai city government, for example, has established Yunhai Venture Capital which will invest 70% of the fund in cloud companies.

With the favorable political and financing environment, the growth of indigenous startups looks unstoppable. INTPLE, founded in 2008 by Sudong Yang, is one of the outstanding examples. Within three years, INTPLE has already applied for several patents for technological innovations and has developed three core cloud platform products - AppOne, EngineOne and MasterOne . In August 2010, the National Innovation Fund gave INTPLE an award for its achievements in cloud computing technology innovation.

Skycloud Technology is another example of a fast growing start-up. The company was established in 2009 by Dr. Suning Tian, a PhD from Texas Tech University and also the founder and chairman of China Broadband Capital (CBC). Today, Skycloud has branches across 16 provinces all over China. Through active participation in the open-source community and prompt market response, Skycloud has developed its core competence in the open and cross-platform cloud technology.

Meanwhile, lured by the huge potential market, established indigenous technology companies with stronger capabilities are also entering the cloud computing field. Domestic firms are even outcompeting multinational companies in some niche markets with their competitive prices and localized products. UFIDA, for example, has been consistently recognized as the TOP1 management software enterprise in China and the largest Enterprise Resource Planning (ERP) provider in Asia since it was founded in 1988. One of the early movers in the cloud computing business, UFIDA won the award of "China's Representative Cloud Innovation Company" in 2011. Independent innovation has always been regarded as a key principle of UFIDA's R&D strategy. After the launch of its SaaS (Software as a Service) product Wecoo.com, UFIDA has introduced its new PaaS (Platform as a Service) product Weiku platform, which serves as an online development platform for Independent Software Vendors (ISVs) and developers.

Indigenous companies have contributed to the growth of Chinese innovative capabilities in each layer of cloud computing. The largest number of cloud companies are in the SaaS layer, providing diversified cloud applications. Some commercialized SaaS products include: Wecoo.com by UFIDA, youshang.com by Kingdee, Alisoft.com by Alibaba, 800APP CRM by 800APP, Xtools by Beijing Volitation, Leadong.com by Focus Technology, Qitongbao by Infobird, iFLY Voice Cloud by iFLYTEK, etc.

In the PaaS layer, leading Internet firms have started the transformation to the platform provider business model. But most of the efforts are still in the testing phase and not yet commercialized. Some published PaaS products include: BC-MapReduce by China Mobile, Sina App Engine by Sina, Baidu App Engine by Baidu, Weiku by UFIDA, cBOS by Kingdee, Aliyun Cloud Engine by Alibaba, QQ Cloud Platform by Tencent, 800APP PaaS platform by 800APP.
In the IaaS (Infrastructure as a Service) layer, Chinese companies are just in the exploration phase and very few of them have capabilities in conducting IaaS research and providing relevant public services. China Mobile, a state-owned company, has moved one step forward in this research field. The BC-EC product – which is part of the Big Cloud System launched by China Mobile in 2010 – is an IaaS product with independent intellectual property rights (IPR).

Cloud computing has aroused a technology and business revolution in China. While a national strategy of indigenous innovation is charting the direction of industrial development, it is indigenous Chinese companies that are bringing new products to the market. Cloud computing represents one of the latest cases of progress along "China's path to indigenous innovation."*


*William Lazonick and Yin Li, “China’s Path to Indigenous Innovation”, working paper, The Academic-Industry Research Network, March 2012.

Dongxu Li is a MA candidate in Regional Economic and Social Development at the University of Massachusetts.

From the Editor

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