Doing Business in China: Datacenters in China

Posted in April 14, 2010 ¬ 3:56 pmh.jeff2,034 Comments »

China has more Internet users than the USA has population, more government agencies than we have businesses a modern telecom and electrical infrastructure and more than 800 million mobile users.

The USA has >5,500 datacenters in operation, while China has <50….. China Unicom, the smaller of the two telecom providers has just 15 datacenters in China? No major Foreign provider? Huge market opportunity??? China adopted the adherence of International Datacenter (DC) standards (TIA 942) in 2006 and began build out of the standard DC Tier structure in 2007. Thus, the existence of internationally accepted datacenter (DC) standards is nascent in China. By comparison, while the USA has more than five thousand DC’s and a mature market for co-location and other related DC services, China may have less than 50 multi-tenant DC’s in total according to Hewlett Packard, China’s premier DC technical designer. Another factor affecting the market was China’s central government recognition after the May 2008 earthquake in Sichuan Province that the natural disaster provisions for critical government data was woefully inadequate.

An effort to identify regions in China least susceptible to such catastrophe’s was in order, and Unis, a major central government contractor and partner with CUBD, was first to market in Zhengzhou, Henan. Additional market dynamics continue to drive demand for datacenters in China.  These include, but not limited to:

  • The  2009 central government stimulus plan targeting China’s health care, specifically the development of electronic patient records
  • Chinese provincial and local government agencies seeking quality DC facilities
  • Multinational enterprises demanding International standards backed by a known IT service company such as Unis
  • Local Chinese enterprises growing from their own back room DC to outsource; and
  • China’s move to Cloud Computing applications

While Internet population is growing rapidly, the eco-system of the Internet in China is considered to be 6-8 years behind. According to IDC, the overall datacenter services revenue in China reached US$371.4 million in 2007. IDC expects this market to reach a value of US$1.2 billion by 2012, driven by the increased use of the Internet as the demand for larger storage and higher bandwidth, especially with the advent of instantaneous video and voice services. Basic service will remain to be the important earning source of datacenter market service providers (SPs).

The proportion of value-added services (VASs) will remain stable in the coming years, due to disaster recovery (DR), content delivery network (CDN), and other services that will be adopted in greater scope," says Ting Yang, senior market analyst, Software and Services Research, IDC China The main driving forces are as follows: First, fast market growth will benefit from the concentrated reconstruction and new projects in the telecom industry, the building of disaster recovery centers in the financial service industry and the renewal and reconstruction of traditional data centers.

Meanwhile, major events such as the Beijing Olympic Games, Shanghai World Expo and Guangzhou Asian Games have actively promoted various localities to invest into data center building. In the next few years, such influences will continue. Secondly, as enterprises deepen their resources integration and centralized management, the demand for data center reconstruction and expansion will continue to expand. Companies are now turning to data centers for lower operating costs, centralized management and safer operation.

Thirdly, technological innovations have pushed forward the fast development of next generation data centers in China. Various new technologies have emerged in an endless stream, i.e., blade systems, multi-core technology, virtualization applications, cooling technology and smart management software. All these technologies have produced a major impact on the application and management of traditional data centers. On the other hand, enterprises' business models have also changed greatly.

Enterprises urgently need to build next generation data centers to adapt to such changes. It is in this context that China's next generation data center market has entered a fast-growth stage. Currently, the telecom and financial service industries make up over half of the market. In terms of industry structure, next generation data center building in the telecom and financial service industries started rather early with large investment, and applications are relatively mature.

As the demand for centralized data management in various industries rises and business models continue to reform, there will be an urgent need for enterprises to integrate their businesses through technological innovations and to build next generation data centers. Development Trend of Next Generation Data Centers in China (From CCID Consulting Report) Despite the many challenges, CCID believes that the next generation data center market will continue to maintain a fairly fast growth momentum in the future.

First, despite a slowdown in China's macro economy, the overall economic situation is nevertheless in good shape. As the government's successive introduction of related measures to cope with the financial crisis and the implementation of the four-trillion-yuan economic stimulus package, the investment of over 10 trillion Yuan will be driven up in localities. Such large-scale investment is bound to push up IT inputs.

This will undoubtedly play a tremendous role in promoting the development of China's next generation data center market. Secondly, enterprises now face a series of problems that traditional data centers fail to resolve, and are eager to switch to new data centers. There will be various increases in new, expanded and reconstruction projects, and future investment will remain high. Thirdly, next generation data centers in China are in a period of fast growth. Looking into the future of China's next generation data center market, most believe that driven by the large-scale infrastructure investment, demands for IT applications in such key sectors, including government, telecom, financial services, medical records and energy will continue to be strong in the next few years. Next generation data centers that are low in maintenance costs and induce quick returns are bound to become a major highlight in the IT market.


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