Recently, Microsoft announced that it will continue to increase its investment in cloud services in the Chinese market by cooperating with 21Vianet to add new data center areas in China. As the fifth Microsoft Smart Cloud region in China, Microsoft plans to officially put it into commercial operation in the spring of 2022.
The move comes as Microsoft seeks to double its capabilities by strengthening its presence in China to capitalize on what it sees as a surge in demand for cloud services in the country.
Another important reason is that Azure has slowly become a major source of revenue for Microsoft. Microsoft does not currently disclose revenue from Azure’s cloud computing business, but in its fiscal second quarter of 2021 ended Dec. 31, 2020, Microsoft did disclose revenue from its Smart Cloud business, which includes Azure. The quarter was $14.6 billion, up 23% from a year earlier, and Azure’s revenue was up 50% from a year earlier.
Some analysts expect Microsoft’s Azure cloud computing service to overtake Office as the company’s largest revenue source at some point in 2022, as the cloud computing business grows rapidly.
Microsoft has changed its head in Greater China
The company also announced a new chairman and CEO for greater China, replacing AlainCrozier with Hou Yang, a former global vice president of Qualcomm. This personnel adjustment is also considered by the industry as a sign of Microsoft’s compliance with the expansion of the cloud market in China.
Mr. Hou, who was born and raised in Shenyang, received a bachelor’s degree in physics from Peking University and a doctorate in electrical engineering from the University of Michigan, according to public sources. After graduation, he worked at McKinsey & Company for four years and eight months. He joined Qualcomm in 2013. He started as a regional sales manager and began serving as senior vice president of sales and business development for Qualcomm in November 2018.
Prior to joining Microsoft, as Senior Vice President of Qualcomm Worldwide, he led Qualcomm’s China Semiconductor Division to triple revenue growth.
In a Microsoft press release, AhmedMazhari, president of Microsoft Asia, said of Hou Yang, “He has a proven track record in business operations, product optimization, sales, and partner and customer relationships, and he is good at driving significant business growth.” Microsoft Greater China will seize the opportunity of future high growth and continue to develop.
Chinese companies have the absolute advantage
It’s worth noting that cloud computing companies around the world are struggling to expand their business in China. The reason is that while demand for cloud services in China is still small compared to other markets, demand for cloud services in China is stronger than ever.
This trend was evident even before the COVID-19. China’s cloud infrastructure market grew nearly 67 percent to $3.3 billion in the last quarter of 2019, more than 10 percent of the global market, according to research firm Canalys. The COVID-19 epidemic has accelerated this trend.
The report shows that China’s cloud market will reach $46 billion by 2023, and 63 percent of Chinese enterprises are taking advantage of cloud-related innovations to accelerate the digitization process of products, payments, e-commerce, automation, etc.
Still, it won’t be easy for Microsoft to break into the Chinese market, where Chinese companies remain overwhelmingly dominant. According to the survey data of Canalys, Alibaba has more than 46% of the market share, Tencent and Baidu are second (18%) and third (8.8%), followed by AWS with 8.6% of the market share, which has been classified into Others.
