Amazon selling part of China cloud business for $300m
Amazon is selling off a portion of its cloud computing business in China to a local partner, but the company still plans to compete in what is a growing market for cloud-based services and infrastructure, reports Enterprise Cloud News (Banking Technology’s sister publication).
Beijing Sinnet Technology will buy a portion of Amazon’s cloud business for CNY $2 billion ($301 million), according to CNBC, which cited a regulatory filing from China.
The two companies signed a partnership in August 2016, where Sinnet operates and provides Amazon’s cloud technology and related services to customers in and around Beijing. However, Sinnet and Amazon agreed to the sale to help meet regulations in China regrading foreign-owned businesses.
Despite Amazon selling off part of its China business, it’s doubtful the company is planning to stop the expansion of Amazon Web Services (AWS) overseas. An Amazon spokesman notes in an email to Enterprise Cloud News: “AWS did not sell its business in China … Chinese law forbids non-Chinese companies from owning or operating certain technology for the provision of cloud services.
“As a result, in order to comply with Chinese law, AWS sold certain physical infrastructure assets to Sinnet, its longtime Chinese partner and AWS seller-of-record for its AWS China (Beijing) Region. AWS continues to own the intellectual property for AWS Services worldwide.”
Right now, several analysts’ reports indicate that AWS is by far the largest provider of Infrastructure-as-a-Service (IaaS) technology in the world, which also makes Amazon the largest cloud provider globally.
Microsoft’s Azure public cloud is considered a distant second. However, most of the AWS business is in the US, as well as parts of Europe. In order to keep expanding, the company has to move into other markets, and China is an exceptionally tempting target considering the country’s economic scale and recent growth.
There is one issue: Alibaba. The e-commerce company’s cloud division – Alibaba Cloud – is already considered the top source of IaaS technology in China, and now that company is looking to expand beyond its borders as well, especially in southeast Asia and parts of India.
This is likely to put AWS and Alibaba Cloud on a collision course over the next few years, as more and more companies turn their infrastructure over to cloud service providers, making the China market even more important especially as the US and Western European markets mature. When one adds in additional competition from Microsoft, as well as others such as Google, IBM and Oracle, it’s clear that Amazon is likely to keep its footprint in China for as long as possible.