China is the second largest consumer economy in the world. Garter Consulting projects that the Chinese cloud computing market will be worth roughly $21 billion by 2018. “As in other sectors, the main challenge for U.S. firms in seizing cloud-related opportunities in China is its regulatory environment.” IBM, the U.S. based technology giant, is the latest to enter the Chinese market with their cloud technology. Their mode of entry is a joint venture with Wanda Group. This new company will license IBM technology in Wanda-owned data centers. Wanda will sell the services to Chinese businesses and ensure that they comply with Chinese regulations.
IBM is far from achieving first-mover or even second-move advantage in this market. Further, this isn’t the first American company entering the cloud computing market in China. In 2014, Microsoft Azure entered the market in a joint venture with 21 Vianet. Additionally, Amazon Web Services entered the market a few years ago in joint ventures with multiple Chinese companies.
Considering the strict technology regulations in China, joint ventures are the only mode of entry for American companies.