Tencent Cloud Plans to Open Five More Oversea Data Centers

By Jia Yizhen

HONG KONG , Apr.28 , 2017

Tencent Holdings Limited, a leading Chinese Internet company in gaming and social network, said on Wednesday that Tencent Cloud, its cloud computing arm, would open five overseas data centers this year to expand its client base. However, the competition in cloud-computing industry is fierce and overseas market might be more restrictive.

The five new data centers are in Silicon Valley, Frankfurt, Mumbai, Seoul and Moscow. The Silicon Valley center officially opened Tuesday, which made Tencent the second Chinese company to open a data center in the technological and innovational hub of US.

The overseas data centers would serve both Chinese companies looking to go overseas and international companies expanding their businesses in China or other parts of the world. They would provide cloud services especially for online finance, video, and mobile game players such as Netmable, Aiming, Gamevil and Supercell, according to Tencent’s announcement.

“We want to enhance our overseas cloud capability to meet the rising demand from companies around the world as they look for fast, reliable, secure and cost-effective services during the global expansion and migration to the cloud era,” Rita Zeng, Vice President of Tencent Cloud said in a press release.

The company also said in March, its cloud service revenue more than tripled year-on-year in 2016.

Though this plan made Tencent Cloud ramp up its offshore centers to eight and it has operated more than a dozen data centers in mainland China, it still lagged far behind Alibaba, the Chinese e-commerce giant, which is the biggest rival to Tencent in cloud industry.

In 2009, Alibaba entered the cloud computing market, which was four years earlier than Tencent. The former led China’s $2 billion public cloud computing market, according to a report from Morgan Stanley. A Deutsche Bank 2016 report also said Alibaba Cloud had an estimated 65 percent cloud service market share in China at the end of 2015, while market share of Tencent, and other players such as Baidu and UCloud was relatively small. There are 14 Alibaba Cloud data centers all over the world, located in mainland China, Hong Kong, the US, Middle East, Australia and so on.

In addition, with heightened concern about the security of data stored in the cloud, governments put more strain on foreign cloud companies, which made Tencent Cloud’s oversea expansion restrictive.

As China placed more restraints on the participation of foreign companies in cloud service market last year, a group of U.S. lawmakers wrote a letter to China’s ambassador, Cui Tiankai, to express their dissatisfaction and concern about the security of more information and personal data stored in Chinese companies.

Governments are likely to question Chinese cloud companies about security matters when they seek to expand overseas, Daniel Liu, a research analyst at Canalys in Shanghai told the Wall Street Journal. “Outside of China remains a challenged market for Chinese cloud players,” he said.

 

-An Assignment of Global Financial Journalism

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