Your Cloud Future Is In China

by Greg Ferro

Can we expect that cloud hosting will be focused on China within 10 years? The infrastructure, the money, the central planning and their enviable access to resources make this inevitable. And why not? In the great marketing machine that surrounds cloud computing, the claim is that your data can be anywhere and that compute power should not be close to you, nor should you even care. And as China moves from agrarian subsistence to manufacturing and then onto a tertiary economy, it will be positioned to move into a services economy. Indeed, the country is doing so already in a range of areas. It seems clear that with access to capital, town planning and labor it is not so hard to conceive that China will be better positioned to be an early mover in the cloud marketplace.

It's already happening. IBM has announced its China Cloud with data center floor space ranging from 330,000 square meters to 620,000 and employing between 60,000 and 80,000 people.

Every data center has practical and physical requirements to build and operate. Today, the infrastructures that we use are often inadequate, and next generation data centers need strong capital investment, good local planning process for building permissions, redundant power supplies (and even power stations) and access to quality human resources.

Power Buildup

The Chinese government already knows that it has a power shortage today, and it's already taking steps to massively invest in alternative power generation with nuclear energy alone exceeding a planned 70 gigawatts.

China is also building out a new electricity grid that will be more efficient, more reliable and more capable than those of America or Europe. If only because it is using newer technology, China will have a significant edge in power in the next decade while Europe and America will still be debating what power policy to have.

Chinese officials also have a plan to own all technology to manufacture their own nuclear plants and power technology for the second or third generation. While they depend on Western companies for most technology, it is believed that they are already learning and adapting the technologies to manufacture Chinese-made alternatives. This will decouple them from global dependency on delivery of new power capacity and increase the pace of change.

Urban Planning

No matter your personal opinion of the Chinese government, the strong central planning of the current political environment strongly favors the development of designated areas that are deliberately designed for data centers and IT services. This means that planning for power generation, population centers and commercial areas can be comprehensively developed from the ground up. Companies can choose to develop data centers in partnership with a political environment that can solve all practical problems .

The current fashion of American companies is to build data centers in unsuitable locations that make long-term security difficult. For example, building on top of earthquake-prone areas (San Francisco) or areas that have no proper access to resources (Las Vegas) or that are subject to water flooding (almost any part of the East Coast) will end when a natural disaster strikes. Europe has similar problems with land availability and environmental issues that are equally problematic.

China loves big. It is big, it has lots of people, it has lots of space, it has lots of resources. They love building big things and are proven able to execute on the largest projects. It's believable that they can build big data centers--no, massive data centers--and make them work as well as anyone else, if not better. Look at the Olympic games a few years back: big and successful.

Cheap and Better Educated Workforce

If you've ever worked with Chinese developers or IT staff, you'll quickly realize that they are smart, really smart. Some companies require job applicants to have an IQ above 140. And there are lots of smart people who cost a lot less than you do. The Chinese education system produces more mass tonnage of smart people than you can imagine.

Further, since education benefits significantly from investment by a central government, the education system is only going to get better over time. Education systems that rely on private funding work well, but assume that all of your smart people will have access to learning, and that isn't true of current systems. Many of your brightest and apt people may not get opportunities to advance.

Need proof? Discussions with HP networking executives about the cost and quality of their software development process for the Comware software in the new networking division they acquired with H3C, and which is fully developed in China, and you'll hear some very interesting points of view.

Because cloud hosting businesses can buy computer goods close to source of manufacture, they will enjoy significant capex reductions. This means greater profits since the huge capital requirements to start a cloud host drains the bottom line. Lower capex means greater profits in the short term.

At some point, the Chinese economy will start to inflate (if it hasn't already), and their manufacturing cost base will be more expensive than some other countries' (Burma, Indonesia, Philippines, Kenya, Namibia, Botswana). Chinese society will develop into providing and supporting value-added services. Of course, the language barrier is significant, and services such as cloud computing are ideal for services model.

Cloud Compute Loads are Dynamic

It likely that some hosting is going to stay local in some countries because there is always a place for some local business and manufacturing, even if just a boutique or service for special interest groups.

But the vision espoused by cloud computing analysts, and vendors, is that compute workloads can be moved anywhere, anytime. Cloud standards and processes are under way to allow this to happen at a technical level, but there is not enough transparency in many cloud services to state where, precisely, workloads are processed. Services like Amazon's Amazon Web Services can restrict workloads to regions but are unable to dynamically transfer loads between sites because of bandwidth limitations. Load sharing between data centers requires specific changes to your virtual machines and systems, which, combined with physical limitations of bandwidth, enforce localized access today.

Conceivably, a repeat of call center off-shoring is a natural event. Once the first- and second-generation clouds are built, the workloads will simply be "outsourced" to the lowest-cost destination. You may not even know that your data has shifted to countries like India or China. There are startups working in the market of "cloud brokering," such as Spot Cloud,  that are precursors to dynamic cloud platforms. The dynamic nature of this data movement means significant challenges to the legal frameworks and corporate integrity of business.

The Impact

Society is still coming to terms with the impacts of the security of our personal data as it moves to India and back as part of the off shoring contracts associated with call centers and back-end processing. For example, not long ago, IBM sold development services and then off-shored them to India. Let's assume that IBM sells you a cloud package. How would you even know if they have off-shored your data and software to another country? Does that country have a legal system that mandates the security of your data? What about protection against industrial espionage? Or the internal security bodies of those governments? The precedent has already been set with call centers--off-shoring and exporting services is perfectly acceptable today.

What are we going to do? China has many advantages to take a significant global stake in cloud computing. However, there is also an imperative to maintain control, to identify legal liability and have good security of data. While the IT Industry is addressing the technical challenges, it seems clear that the regulatory, privacy and legal liability issues are not being addressed in enough detail. Companies should take great care to ensure that they evaluate their external computing with these values in mind, not just a focus on the bottom line.