Since the beginning of this year, the trend of "cloud going global" has continued to accelerate, with cloud service giants such as Alibaba Cloud, Tencent Cloud, and Huawei Cloud all stepping up their efforts to seek a larger overseas presence. In their view, going global is currently one of the most certain opportunities and represents a generational opportunity for Chinese companies.

Looking back, Chinese cloud companies have been going global for a decade now, spanning three distinct stages. Over these ten years, their overseas journey has filled Chinese cloud service providers with confidence, anticipation, and hope for cultivating the global market.

However, just like currents, rapids, and shoals, the overseas market, besides presenting opportunities, also harbors triple risks stemming from geopolitics, culture, and competition. How can these risks be mitigated to uncover the treasure?

Why is "cloud going global" so popular?

Today, going global has become one of the hottest topics in China's cloud computing industry. Leading domestic cloud service providers have taken Asia-Pacific as their starting point, leaving their footprints around the world, and competing with foreign cloud service giants. Going global has become a necessity and an important strategy for them.

Alibaba Cloud, Tencent Cloud, and Huawei Cloud, as three representative players, have been cultivating the overseas market for many years, having started their global expansion plans as early as 2014.

The three giants each excel in different business areas. Alibaba Cloud focuses on e-commerce, logistics, and retail, while Tencent Cloud specializes in gaming, live streaming, and audio-visual services. Huawei Cloud has an advantage in serving government and enterprise customers.

Over the past decade, the three giants' expansion into overseas markets can be roughly divided into three stages: "going global layout - going global business - going global services":

Stage 1 (Going Global Layout): From 2014 to 2018, they began formulating international strategies, announcing global expansion plans, and laying out overseas operations;

Stage 2 (Going Global Business): From 2018 to 2022, they started "accompanying" domestic enterprises going global, attempting to "take root" locally, continuously enhancing their overseas deployment capabilities, accumulating overseas supplier resources, and expanding customer and business channels;

Stage 3 (Going Global Services): Since 2022, they have provided comprehensive support to domestic enterprises going global, while simultaneously initiating the construction of a localized ecosystem in overseas markets.

Data from the China Academy of Information and Communications Technology (CAICT) shows that in 2022, the scale of China's cloud computing going global reached 25.7 billion yuan, with a market growth rate of 42.8%, and it is expected to maintain high growth in the future. Industry experts believe that as domestic cloud service providers accelerate their overseas expansion, new changes will emerge in the global cloud service market landscape.

In the early stages of going global, the reasons behind domestic cloud service providers' overseas expansion stemmed from both policy and industrial system aspects.

First, in the 1990s, the country already proposed the "going out" strategy, encouraging domestic enterprises to explore international markets and invest overseas to compensate for the inadequacies of domestic markets and resources.

In 2013, the country put forward the "Belt and Road" initiative, aiming to strengthen economic cooperation and regional integration among countries along the route. This initiative accelerated the global layout of domestic technology industries and the overseas expansion of domestic enterprises.

Second, after years of development, the domestic industrial system has gradually improved. Leveraging technologies such as cloud computing, big data, and AI, different industries have achieved technological innovation and industrial upgrading. While meeting domestic market demands, enterprises' capabilities have begun to spill over into rapidly growing overseas markets, gradually forming a new overseas business combination of "production capacity + brand + technical services + business model".

Since 2018, with the accelerated overseas expansion of Alibaba Cloud, Tencent Cloud, and Huawei Cloud, "cloud going global" has gained new momentum.

First, from the industry distribution of going global in recent years, manufacturing, retail, and IT services have emerged as the three "vanguards," mutually driving each other forward.

Domestic home appliances, automobiles, consumer electronics, and other products have reached all corners of the world through cross-border e-commerce platforms. The digitalization and intelligence infrastructure and software technology services required by manufacturing and retail enterprises going global have become essential.

Second, after years of fierce competition in the domestic cloud service market, a demand ceiling has begun to emerge, and cloud service providers' revenue growth has declined sharply in recent years.

In contrast, the revenue growth of foreign cloud service giants is still surging. Therefore, there is a need to seek new incremental markets and profit margins to open up new revenue streams.

Going global brings more than just revenue to cloud service providers. In the view of the aforementioned industry experts, going global has triple significance.

First, to become a truly global cloud service giant, it is essential to establish an internationalized technical architecture. The overseas expansion of domestic cloud services is more importantly about competing with international cloud giants, delving deeper into technological trends and industry directions, strengthening their own capabilities while also bringing new vitality to the domestic market.

Second, during the implementation of overseas strategies, as the scale of overseas investment continues to expand and technical services and teams become localized, domestic cloud service providers can not only better penetrate overseas markets, acquire necessary resources, and expand sales channels but also establish and enhance their brand image in overseas markets.

Third, by providing digital and intelligent services to more countries, cloud service providers can help overseas publics break stereotypes and prejudices about China, such as "the world's factory" and "exporter of cheap commodities," thereby promoting a new image of China in the world. Additionally, it enables people in more countries to benefit from the development dividends brought about by China's technology industry.

Triple Risks in Exploring Overseas Markets

However, good things come to those who wait. In the early stages of "cloud going global," these cloud service giants encountered "geopolitical risks."

Before 2018, domestic cloud service providers had formulated an overseas expansion plan of "Europe and America first, then Southeast Asia." The European and American markets are relatively developed, with high customer willingness to pay and correspondingly high requirements for cloud services. If they can gain recognition in these regions, it will not only be a testament to their capabilities but also make it easier to expand into developing country markets.

However, in 2018, the European Union introduced the General Data Protection Regulation (GDPR), which has since resulted in hefty fines almost every year. Microsoft and Amazon have received related complaints and fines as a result. This has impacted domestic cloud service providers' willingness and plans to expand into Europe and America.

According to the GDPR, sensitive businesses cannot use public clouds and require local private deployment. This means that domestic cloud service providers will face significant restrictions in these regions, making it difficult to conduct business and gain customer trust.

Another major obstacle in European and American markets stems from political factors. Whether it's TikTok being asked to stop using Alibaba Cloud services in the United States or European countries harboring doubts about domestic cloud service providers, these incidents reflect the complex political influences in the global digital economy.

As a result, the Southeast Asian market has become the preferred choice for domestic cloud service providers.

The Southeast Asian market boasts numerous advantages. With a large population and rapid economic development, it holds immense potential. Moreover, compared to European and American markets, Southeast Asia is geographically close, socially stable, and heavily influenced by the Chinese community, sharing many similarities with the domestic market in terms of consumption habits. More importantly, the rise of the internet industry and the digital transformation of local enterprises have generated significant demand for cloud services.

However, "cultural risks" soon followed.

Cloud service providers face a complex environment in Southeast Asia. Different countries have distinct languages, cultures, customs, and even within the same country, there are numerous ethnic groups. Unfamiliar territories may harbor political, legal, and social risks.

Talent recruitment and cross-cultural communication are typical examples. In Southeast Asia, traditional finance and telecommunications industries have absorbed a significant portion of local talent. For a long time, the IT industry has lacked appeal to local talent, and there is a severe shortage of professionals required for "cloud going global," including expert consultants, technical researchers, data analysts, and business operators.

For domestic cloud service providers, a crucial prerequisite for taking root locally is to localize their operations and teams. However, finding and retaining suitable professionals remains a significant challenge to date.

The workplace culture in Southeast Asia is also vastly different from that in China. Industry insiders have told the author that locals prioritize company environment and work atmosphere, seeking a relaxed work pace. "There is no 'involution' culture in Southeast Asian workplaces like in China, for instance, the '996' work schedule is unimaginable there. Such cultural and work-related adjustments and communications are bound to be long-term and time-consuming."

"A typical mistake made by domestic cloud service providers is assuming they can replicate their successful domestic experience in Southeast Asian markets, but facts have proven this approach unfeasible," said an industry analyst. Misunderstandings about the local cultural environment determine the difficulty of market expansion.

Moreover, "competitive risks" cannot be overlooked. Statistics show that Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) occupy up to 70% of the market share in Southeast Asia and are intensifying their efforts in the region.

This year, Microsoft announced that it would invest USD 1.7 billion in Indonesia's cloud and AI infrastructure over the next four years and another USD 2.2 billion to support Malaysia's digital transformation. AWS plans to increase its investment in Singapore to SGD 23.5 billion over the next four years. Google, meanwhile, will invest USD 2 billion in Malaysia to establish its first data center and GCP region.

Currently, most of the customers of domestic cloud service providers in Southeast Asia are domestic enterprises going global, and local enterprises' recognition of domestic cloud services remains to be improved.

Taking going global in Southeast Asia as an example, in conversations with the author, many industry insiders believe that the risks and challenges facing domestic cloud service providers' overseas expansion, both presently and in the future, primarily stem from:

First, fierce competition. Domestic cloud service providers must compete with AWS, Microsoft Azure, and GCP in overseas markets, which collectively occupy a significant portion of the global market share. In contrast, domestic cloud companies have low brand recognition, weak brand influence, relatively few ecological partners, and room for technological innovation.

Second, understanding and insight. Although domestic cloud service providers are expanding aggressively in overseas markets, they still lack experience in navigating different countries, making it difficult to quickly establish a local presence. Localization efforts in cultural integration, team building, and other aspects remain inadequate, inevitably leading to "acclimatization issues."

Third, talent recruitment. In overseas markets, especially in developing countries, high-end talents who can communicate across languages, understand local cultures, and possess technical skills are scarce. Cloud service providers often need to invest significant time and effort in finding suitable talent, significantly increasing their costs.

Therefore, to take root in overseas markets, cloud service providers need to leverage their strengths and avoid weaknesses:

First, they should fully understand and comply with the laws and related requirements of various countries, integrating risk management into daily operations. By closely collaborating with local governments and regulatory agencies and establishing professional compliance teams, they can build high-quality compliance systems to promptly mitigate compliance and security risks.

Second, they should identify their areas of expertise and scenarios, construct a differentiated competition system for products, services, and pricing, and provide overseas customers with "butler-style services" that are better and faster than international cloud service providers. This will help establish customer trust, enhance customer reputation, and compensate for shortcomings in brand recognition and influence.

Third, they should prioritize industry-academia-research collaboration, strengthen cooperation with foreign universities and academic institutions, establish a sound talent training mechanism, and create a series of cross-national communication, exchange, and training platforms at different levels to attract more overseas talents to join their teams.

Conclusion

Today, the "Belt and Road" initiative has a new vision and has entered a stage of high-quality development. Against this backdrop, domestic enterprises, including cloud service providers, need to further promote China's importance in the global industrial and value chains, where going global plays a crucial role.

Unlike exports, going global tests an enterprise's overseas operational capabilities, brand-building abilities, and value delivery capabilities. As geopolitical unrest intensifies in different regions globally and the era of "de-globalization" arrives in phases, the term "going global" has been imbued with new meanings.

Taking cloud service providers as an example, facing the unpredictable overseas market, "going global" at this stage is not merely a strategy but also a mindset.

It requires cloud service providers to genuinely demonstrate their commitment to taking root locally and engaging in long-term operations. They must also possess the patience to continually delve deeper without being blindly ambitious or impetuous. Furthermore, they must have the determination to gradually enhance their core competitiveness and create value for customers. Only in this way can potential risks be mitigated, more Chinese cloud wisdom be unleashed, and more Chinese cloud power contribute to the world.