Chinese clouds target small and medium enterprises in APAC in search of growth

Canalys Forums APAC Chinese cloud vendors are undercutting their US counterparts on price and making inroads into the Asian small and medium business market, according to analyst firm Canalys.

Speaking at the Canalys APAC Forum event yesterday in Indonesia, analyst Yi Zhang observed that AWS, Google, and Microsoft currently operate 32 datacenters across Asia-Pacific, compared to 20 run by Alibaba, Huawei, and Tencent. But the Chinese clouds' facilities represent almost half of their offshore presences – a sign they are targeting the region.

Zhang said China's clouds sometimes appeal because they each have strengths drawn from their parents' main activity: Alibaba Cloud serves e-tailers well, Tencent Cloud has products for the entertainment industry, and Huawei Cloud is strong in core IT.

But the analyst feels the "big advantage" China's clouds offer is price – typically 30 to 50 percent less than rival hyperscalers.

"This cost stage makes cloud service more affordable and accessible, and to those price sensitive customers, this can mean the difference between being able to access cloud or being entirely priced out," explained Zhang.

Small businesses, in particular, are prioritizing affordability over other considerations, including data compliance – a long-standing issue for Chinese cloud vendors. Concerns often arise regarding adherence to local data sovereignty laws and the potential for government oversight or access.

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"It's understandable that some partners may be cautious about working with Chinese vendors due to the customer concerns about data compliance," the analyst acknowledged.

However, attitudes are shifting. Market acceptance has increased in the past year, with two thirds of channel partners now seeing greater opportunities with Chinese vendors compared to a year ago.

Zhang described the expansion of Chinese cloud vendors into APAC as a "strategic necessity," driven by changing economic conditions and declining domestic enterprise demand. The Chinese cloud market has seen growth plunge from 66 percent in 2020 to just 14 percent in the first half of 2024, forcing vendors to seek revenue beyond their borders.

The APAC region was a natural choice for expansion because of its geographical proximity, cultural ties, and a booming digital economy. According to Canalys, the region accounts for 53 percent of overseas revenue for China's top three cloud vendors. ®