Cloud computing continues to be an area of significant interest and investment for many companies. Current forecasts predict IT and cloud computing spending to total $112 billion in 2012, a 15% increase over 2011. Some companies view cloud computing as a potential bridge to bringing well-established business practices into emerging markets with huge opportunities for expansion. Given the size of the current and future market in China, companies are now evaluating whether and how to engage in “cloud” businesses in China. In this DechertOnPoint, we discuss a number of key issues that need to be considered in making thoughtful business decisions about cloud computing in China.

Have Your Servers Located in China: How Censorship and the Great Firewall Affects Service

Censorship is and will likely remain a major stumbling block for the development of internet services in China, including cloud computing. For example, Google Docs, a well-known cloud-based program, is from time to time totally inaccessible in China. Technically, cloud services supported by servers outside China can (and do) work in China, but the risk of being blacklisted can create major continuity issues for the business. Censorship is based on a complex interpretation of a variety of laws that can lead to unpredictable blocking and potential service interruptions. One of these screening processes is known as the Great Firewall (GFW). Apart from implementing censorship, this process also impacts the speed of the cloud due to the additional layer of data analysis by Chinese authorities. There are also a number of problems with basic internet infrastructure: cloud computing only functions as a useful commodity when used with a high-speed broadband connection. However, China’s average rate of data transfer is just 1463 kbps. In contrast, the average internet connection speed in OECD countries is about five times faster (source: Akamai – State of the Internet report Q4 2011).