China’s cloud industry is expected to grow to US$103 billion by 2020. The growing demand for cloud technology has led to domestic & foreign IT companies rolling out new services.
Data centers in China are not connected internationally as they are in nearly every other country. Local laws and regulations in China create both unique challenges and important considerations for businesses migrating and managing cloud technology in the country. Dezan Shira & Associates conducted an internal review of cloud providers in China and have partnered with Microsoft to offer a range of cloud-based solutions.
What is the Cloud?
Cloud technology (also known as “cloud computing”) is when servers, storage, databases, networking, software, and analytics are hosted on the Internet and stored on large, privately owned data centers. Instead of investing into physical hardware, businesses subscribe to these services and pay either a monthly or annual fee. This fee is determined by the amount of data and number of users a business requires, making it easier for a company to scale their operations up and down. Employees access business applications online while the company data is backed-up either online or in a physical data center.
Using Cloud technology not only allows businesses to save money on IT costs, it also keeps employees around the world better connected with their colleagues, clients, and partners.
Cloud technology in China
In China, data centers that store and connect user data are “isolated” from global networks. This means that, though cloud-users outside of China can still communicate and collaborate with their China-based colleagues, both must use separate user accounts and thus cannot access company data from a common source.Similarly, companies headquartered outside of China can still manage China-based company systems and data by using a Chinese user account. However, these users will experience slower connection rates.
Despite these limitations, using the cloud remains a cost-effective way to scale operations and increase productivity in China. As Thomas Zhang, Dezan Shira & Associates’ IT Director, explains, “Cloud technology has remained a relatively closed industry in China. While this can create frustration for companies during the initial setup and familiarization phase, it does not hinder the overwhelming benefits of using the cloud.”
Microsoft Cloud in China
The Chinese government requires that data related to the privacy of its citizens, or else connected with the country’s physical and digital infrastructure, be stored in mainland China—a regulation that can be complied with when companies choose Microsoft’s China-based services. Microsoft has partnered with China-based 21Vianet to run two data centers in Beijing and Shanghai.
Only Microsoft’s China services can provide official VAT invoices (or a fapiao), a necessary requirement for some businesses that need to book their expenses in China for tax purposes.
Microsoft Office 365 and Azure have gained popularity for their “pay-as-you-go” models, which allow companies to increase and decrease the volume and scale of Microsoft services they consume as their own operations expand or contract. Microsoft is also the first cloud service provider to announce that their Chinese data centers follow the European Union’s General Data Protection Regulation (GDPR).
Data residency (or data localization) refers to the physical location of data as well as the legal and regulatory requirements around it. China’s Cybersecurity Law mandates that critical information infrastructure (CII) operators must store certain important data, including personal information relating to Chinese citizens, within mainland China. CII operators are network operators in sectors relating to China’s national security or public interest, such as information services, energy, and transportation. Cloud providers should outline the steps they take to conform to local regulations.
Fulfilling local data residency requirements in no way means that companies have to compromise on privacy. Companies shopping for a cloud service provider should ensure look for robust privacy policies and guarantees that data is not shared with third parties. When using Microsoft, customers retain the rights and titles to their data. Microsoft partners with China-based 21Vianet but uses only Microsoft technology and world-class cryptography.
Migrating to the cloud
Ultimately, businesses opt for China-based clouds when enough of their workforce, clients, and partners are based in the country. A well-planned data migration from on-premise servers to cloud technology can save companies money and boost productivity.
This article was first published on China Briefing. Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India, and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at firstname.lastname@example.org. Further information about our firm can be found at: www.dezshira.com.