Presentation on theme: "Datacenter and Cloud developments and challenges in China"— Presentation transcript:
1Datacenter and Cloud developments and challenges in China Terence GrahamAssociate Researcher, BroadGroupand Hong Kong University
2AGENDA BroadGroup Study China’s Mushrooming Cloud Scale of Investment and OptimismInner MongoliaMarket DriversKey Challenges – Power and CoolingKey Challenges – Level of Market MaturityKey Challenges – LicensingBusiness ModelsPricingModular2 Case Studies for Market EntryCloud Ecosystem in ChinaDatacenter Capacity and ProjectionsConclusions
3BROADGROUP – CHINA STUDY New study of ChinaAssessed Datacenter players, markets, strategies and Cloud in ChinaConducted over past five monthsWill be largest study of its kindPublication November 2012Some of the key findings …..
4CHINA’S MUSHROOMING CLOUD 5 official Cloud CitiesBeijingShanghaiHangzhouWuxiShenzhenData integration on backend is difficultHp ibm accenture working with municipal champions on smart city smart gird smart meter projectsSerious projects takes time before one can see resultsAlso many tier 2 cities vertically integrated city and suburbs textiles hub, pharmaceutical hub, chemicals hubOracle working with these cities on vertical clouds tailored to the demands of those specific industries
5CHINA’S MUSHROOMING CLOUD Further 12 Cloud City ProjectsHarbinDalianHohhotOrdossWuhanLangfangChengduLanzhouChongqingXianFoshanGuangzhouBeijingShanghaiHangzhouWuxiShenzhenBt healthcare cloud tier 2 city in gansu provinceWhy?Someone in the office has personal connection with someone powerful enough to cut through the red tape and get the project off the groundBasically every tier 1 and tier 2 city has a cloud planPowerful local city officials competitive
6SCALE OF INVESTMENT AND OPTIMISM More than 17 provinces and municipalities constructing 30 large-scale datacentersTotal investment 270 billion RMB (US$43.26 billion)Total investment in cloud computing projects in China expected to reachUS$154 billion in coming few years (Asia Cloud Computing Association)Rackspace to accommodate more than 10 million server units, 5x current total national datacenter capacity (人民邮电报 )Heavy construction, light applicationsHype?From 5 to glut to cloud as colo?From 5 to glut to coloMention tier 2 spending on cloud3-4 million on cloud infra, 500,000-2 million on storageLess infighting easier to get projects off the groundNumber of experts and research institutes have made projections and estimates for the capacity coming onlineHype the numbers are so bigone natural reaction is cynicismBuild streets first, worry about cars later
7INNER MONGOLIA Power supply and lower costs New eco system - companies announcing set up business processing centresInvestment occurring in datacenter sectorAccess huge amounts of space (unlike Tier 1 cities)Not for all enterprises – latency issueYoung educated workforce?Starter flatBargain limited resource give them coal mining rightsHalf price of bjNorway/finland/iceland location agnostic people fixed price 15 yearsLatency online gaming/fast tradersDc within half an hour carCITIC telecom ifcOne of the most expensive per square meters dcs in the worldCheap power = Iceland/Finland/Norway fixed prices 15 years for those that are location agnosticUnicom Langfang/Beijing/Inner Mongolia
8MARKET DRIVERSGrowth in China being driven by increasing consumer and business onlineSocial Networking (Behaviour)Gaming44.1% CAGR27.5% CAGRSocial Networking Site Users (millions)Online Gaming Market (RMB Billions)Transactions/Data Storage“More than one-third of today's Internettraffic is devoted to video consumption, andwe expect that to grow to 80 per cent by theend of 2015“Scott Guthrie, corporate vice president, Windows Azureapplication platform, Microsoft+ MOBILE GROWTHText, Video, Photos, Mobile Internet ….Reflect changing behaviorTaobao story80120Linkedin68.2% CAGROnline Sales Volume (RMB Billions)Source: National Bureau of Statistics of China
9MARKET DRIVERS 12-5 Targets 1.2 billion mobile users More than 800 million Internet users, Internet penetration rate of over 57%Fixed broadband Internet access to more than 250 million, more than 40 million FTTH usersOver 450 million 3G users, accounting for over 36% of total number of mobile phone usersInternational bandwidth of ８ＴｂｐｓAchieve LTE commercializationIPv6 broadband access users more than 25 million5 Year Plan2012 (Year 1) Server virtualization and desktop virtualization (VDI)2013 (Year 2) Try to upgrade to cloud2014 (Year 3) Private cloud plan2015 (Year 4) Public cloud plan2016 (Year 5) Private/public/hybrid cloudBuilding blocs being put in place nowWhen see public cloud
10MARKET DRIVERS SEI Strategic Emerging Industries Cloud computing industry chain expected to reach 750 billion to 1 trillion RMBby 2015“There is no doubt datacenters are an indispensable and integral part of the coreresources that make up a country’s economic, political, social, and cultural activities,and will become one of the country‘s most important strategic assets.” (周宏仁)National broadband planBroadband Development1.6 trillion RMB, of which 570 billion RMB in broadband fixed access networksEncouragement of private capital into telecommunications sector (June 2012)Do not like paying royalties to foreign ip holdersOne track build national ecosystem for cloudDisappointed if govt didn’t come out and say it would try to form a china cloud standardIndigenous innovationBb ubiquitous HK example21th century economy280 billion yuan ct to increase access speed by factor 10 in 3 years
11KEY CHALLENGES – POWER AND COOLING Price of PowerPrice 80RMB per kVA (Beijing) – Can negotiate to 38RMB in ShanghaiHigh Power Consumptiontotal datacenter power consumption in China 70 billion kWh % of the country’s total (Other estimates put at 5% of total output)Medium Sized DatacenterTo use 200w powered servers in a medium-sized computing center of 10,000 servers, annual electricity bill > 30 million yuanNew energy efficiency focusMajority of current datacenters – coal poweredMIIT 工业节能“十二五”规划 calls for the establishment of China IDC green standards and an 8% reduction in datacenter PUE by 2015PUE valuesNeed to move from current high 2.5 to below 1.5Baidu pue 1.321vianet free air coolingpoor design 200 watt powered annualto achieve green targetrecognize international enterprises to outsource to them their datacenter footprint in China CSR statements at shareholder meetings – why important internal targets enterprises want assurances about power increasingly a major issueBaidu did not care much about PUE concept but when it is now processing 100 PB a day through its datacenter and Tencent announced number of servers and traffic growing at 50-60% annually take a much harder look at PUE and cloud-like technologies like virtualizationBaidu now 1.3 PUE
12KEY CHALLENGES – LEVEL OF MARKET MATURITY Complexity of Networks and connectivity procurementCLOUDStill in early stageStill not realized saves cost on OPEX not CAPEXLong refreshment cyclesENTERPRISEIT Dept gap with CLOUDNorth south divide31 provinces 31 telcosPoor interconnectionOnly 3 internet peeringFirewallMaintain each provincial monopoly position – ct and unicom could resolve the problem overnight but don’t No peering –piece network togetherfirewall in/out ChinaKorean gaming rude awakeningVirtualization can’t do everything 1000 pcs 100 broken if datacenter breaks downVmware selling lot of virtualization software for testing and developmentOracle erp us 80% packaged software 15% youngyou in china 50% own erp – private companies only 10 years oldNo standardized interfaces or messaging buses// Complexity of cloud no definition Academic conference no one could really define cloud in one sentence. 20 vendors 20 different definitions someone joked Chinese govt should step in and set a definition.8-9bn RMB in turnover only spend 15 million on IT – limits the market – SMBs not spending in US and Europe SaaS sold directly to SMEs. Build as powerful as Google. Amazon 3-5 years ahead. If Amazon and Google were to enter the market no holds barred Baidu would disappear overnight but Tencent would be a formidable competitor. SLA – data security multitenancyIT departments - Fear of centralization,Internal gap with business deptsCustomization at odds with monthly fee model+ strong influence of 3rd party ISVs and SIs
13BUSINESS CHALLENGES KEY MARKET= CLOUD LARGE KNOW-HOW ENTERPRISES Finding people with 3-5 yearscloud experienceTRUST,SECURITYLIABILITYWho wantCLOUDCLOUDCOMPLEXITYVastly underestimatedCloud complexity build as good as google/amazonShandaPopular gaming platformUsed cloud like technologies DDoS – competitors would tryno idea of how many servers it hasReceived Govt handout to show govt officials to demonstrate what an amazon type platform looked likeVery poor monitoring systemsYou can really expect a great platformPersonalities in internet flamboyant used to work for amazon s3Cloud incubator no IaaSBig cloud centers not interested in attracting startupsNot spending 8-9bn rmb 15rmb on it/ sla/multitenancy/BT puts together a great product Haggle on price end up with a bare bone version of cloud service, these companies ROI does not include other elements such as business agility – cost savings and make up their mind whether they are going to use you or hire 2-3 more peopleSTANDARDSDATAPRIVACYCLOUDINCUBATORENVIRONMENTPoor
14KEY CHALLENGES - LICENSING Perhaps the most significant current challengePolicy uncertainty: Very black and very grey“In building our first datacenter in China, we have learned a lot, how to communicate with authorities, what applications are needed, what government approvals are required, how to deal with delays and setbacks.”Current – one license to build datacenter; another to arrange connectivityVIE schemePrivate capita lFujitsu 80-20licensesSpace/power foreign company like kddi or fujitsu8020Identified a gap in market they could exploitVisit 4 star dc left a lot to be desiredFujitsu boss visit many timesCustomer has to deal with ct/cu/cmWinwinHogan want to win cisco communications hub greater asia, several tens of thousands for rackspace, couple million to china telecom for bwDid this because it had worked with unicom in shanghai and upset local incumbent a bridge u don’t want to burnRumors licensing Examples of JVs – Akamai, Symantec/Huawei, sds and datapipe, joyent, emc and Lenovo, citrix has done wellPrivate capital into DC conference release guidelines postponed indefinitely wait till after nov leadership changeVIE Sina badge of honor for Internet companiesVIE scheme 3 years billionaires strong personalities Shandacloud person amazon S3 /CaymanAlipay taken out of equation no legal recourse to pursue the Chinese holder of the licenseVIEEnergy and mineral companies seeking to use VIE vehicle > govt forced to actTRUSTFinding entrepreneurs 3 years they want to become all billionaires social gaming21vianet iporaised a lot of money for expansion and 4g licensebad cloud/cdn no biz bleeding you have to be very careful about bottom line
15PRICINGEnd user (list) price is RMB per month (per rack), with some areas cheaperIn Tianjin there is one site, a reseller, offering 2400 RMB per monthPeople expensive bandwidth cheapBeijing and shanghai competitive even for title of most expensiveLicensed 21vianet bgp you get as # from cnnic China Internet Network Information CenterConfigure routerDepending on where enduser is who is accessing your website or product use automatically routes to use network offering least congestion2000 rmb a meg startup 100 megGo to hangzhouBeijing and ShanghaiEven same quality BGP there is a price differential, BJ is 50% cheaper than Shanghai – maybe it’s the business culture in Shanghai. Shanghainese are more wise to doing business (and not getting fooled). Compromise, if CT/Unicom is selling at 100, the other telco (CT/Uni) will do 85/90, there is a little bit of difference, but they (Unicom in Shanghai) won’t sell at 60/70 to compete with CT.2000 RMB a meg bgp got to tier 2 city if you are a cloud city.foreigners always get charged premium chinacache quotes 10x
16MODULAR Fast deployment – 3 months - but not cheap Sites like Ordoss (Inner Mongolia) might be more suitableNot an easy sell in China/not perceived as flexible21Vianet own patents on modular datacentersordoss west solar power21 has patents on modular
17MARKET BARRIERSAccess to capital / funding – scale issue for China key market coverage –Very high capex requirementsThere are 3 kinds of IDC license – (1) like carrier (China Telecom, Unicom) they don’t need a license can do IDC using telecoms license, (2) (domestic) companies like SDS or GDS, can build DC and provide service, (3) just buy capacity, rent DC from China Telecom or other IDC, and become a reseller.Access to Power – limitations of grid – customized solution for higher powerVery expensiveAccess to bandwidth – especially cross city/provinceFibre link and last mile200m rmbNot counting land“To create a cross-cloud, cross-region, real-time application support network.”Beijing/Shanghai/Guangzhou/Shenzhen/ - Chengdu/Xian/DalianTalk to shareholders200m rmb a datacenter not counting on landfacility over which you have complete controlnot 21vianet franchise model with local telco > reduce capx exposure but once biz growsnational presence a stronger business – not like UK London or France with ParisChina is like several countries stuffed within the bordersGain scale you become like Telecity with a presence in countriesScale of operations – multiplicity – achieve economies – unified design and server configuration on the backend – improved ROIForeign companies are not getting licenses full stopRunning back and forth6.8 kva per rack customized but will pay a lot1.5 EDCyou could get cheaper bw in another province but the provincial pta will step in and prevent you – protect each provincial ct – difficult to create own network/NO SPOT market21 vianet certain amount of fiberShanghai sds zhangjiangDr. peng great wall broadbandAlibaba
18DATACENTER COMPETITION - LANDSCAPE “Big 3”China TelecomUnicomChina MobileDifferent cloud strategiesCarrier Neutral21 VianetGDSDr PengSDSPlanning to buildAlibabaBaiduTencentMassive ProjectsRange InternationalRange crossborderCarrier conflict of interestUnicom tail end of a drawn out merger between it and netcomExcitedFirst time building real datacentersStarting to seize control of its destinyWhy carrier neutral good cannot commoditize quality of service db story / 24 hours china mobile
192 CASE STUDIES FOR CHINA MARKET ENTRY Case Study 1 - SST - Shanghai Symphony Telecom – 信天通信Importance of a clear cloud storyCase Study 2 – EquinixFollowing the US$230.5 million acquisition of Asia Tone in July 2012, Equinix gained a total of 6 datacenters and one disaster recovery center located across Hong Kong, Shanghai and Singapore, including SH5. The first phase of SH5 will provide 200 cabinet equivalents, expanding to 900 with a gross area of 80,000 square feet when all three phases of SH5 are completedTrustGood internet citizen awardPull the plugDc in guangdong province 70gigBlog/pornography/internet scamChild of a loveless marriage
20CONCLUSIONS Who will be the winners? Experience elsewhere shows winning datacentre companies:Have size and scaleAchieved superior energy efficiencySecured renewable energy supplyHave established clients and service offeringsVertical market expertiseRegional expertise (multi-country)Cost/Technical DifferentiationFocus on verticals/market experienceSST not selling to engineer bandwidthNeed to understand industryHiring new peopleThink what the enduser is going to do with the bandwidthFinance companies superfast hilatencyGovt datacenters UK special audit comply security requirementsNot general approach dig deep into that verticalAmerican healthcare datacenters manage compliance rules these companies exist undermultiprovinceCost and technical differentiatorOnce build dc constantly have to invest in the facility to keep it upgraded and up to new standards.
28MARKET PLAYER LANDSCAPE 3 state-owned operatorsFrom Red Ocean (红海) to Blue Ocean (蓝海 ) back to Red Ocean“In China the 3 operators [start] with 3 different cloud strategies but in thefuture will do similar things. We always compete, red ocean, price is important.”TAB: Tencent Alibaba Baidu3rd party or carrier-neutral datacentersISVsSIsthe chicken and egg problem
29CHINA TELECOM Backbone network bandwidth (骨干网带宽) of 22 Tbps International bandwidth (国际出口带宽) 925 GbpsNumber of broadband users 80 millionDatacenter space over 1 million square metersDatacenters 300+3 star Tier ? and above datacenters 2655 overseas datacentersRacks over 100,000, with another 80,000 on the wayCurrently operating 20,000 VMs (高性能虚拟主机) in 3 datacenters in Shanghai, Guangdong, and SichuanStorage capacity of 20,000 TB IaaS servicesInstalling 300,000 WiFi hotspots to reach a total of 900,000 around country
30CHINA TELECOM – NEW BUSINESS UNIT Quest for the IT holy grail:March 2012 China Telecom creates new business unit bringing IDC and cloud computing business together, 中国电信天翼云公司 or 中国电信云计算公司, led by Dr. Jerry Xie (谢朝阳)Key implications:
31BAIDU / TENCENT / ALIBABA Aim to build nationwide network of datacentersStill relatively young companies so will take some timeFear of becoming obsolete like Yahoo (company DNA)Use cloud-like technologies to build platform that delivers better end user experience for content (main competitive advantage)Specs: commodity-PC server & rack power & bandwidth-hungry & own management software (“special sauce”)Like-Google approach to datacenters?Change in relationship with China Telecom & China UnicomOpenness & Zynga problem 70,000 web-based applications run on Baidu platform or run on their own servers with interface defined by Baidu
32SEI Strategic Emerging Industries GOVERNMENT AS ENABLERSEI Strategic Emerging IndustriesCloud computing industry chain expected to reach 750 billion to 1 trillion RMB by 2015“There is no doubt datacenters are an indispensable and integral part of the core resources that make up a country’s economic, political, social, and cultural activities, and will become one of the country‘s most important strategic assets.” (周宏仁)National broadband planThe campaign against fake broadband1.6 trillion RMB, of which 570 billion RMB in broadband fixed access networksEncouragement of private capital into telecommunications sector (June 2012)
33TARGETS 1.2 billion mobile users More than 800 million Internet users, Internet penetration rate of over 57%Fixed broadband Internet access to more than 250 million, more than 40 million FTTH usersOver 450 million 3G users, accounting for over 36% of total number of mobile phone usersInternational bandwidth of ８ＴｂｐｓAchieve LTE commercializationIPv6 broadband access users more than 25 million
34有没有中国特色 的云计算发展路径？ Cloud with special Chinese characteristics?
37In China - Cloud = IDC + CDN THE GROWTH OF CLOUDIn China - Cloud = IDC + CDNChina Mobile rolling out IaaS in Guangdong province by end of 2012VDI licensing “3 for 1”China Unicom in Shanghai
38In a Nutshell“They have no idea how difficult it will be to replace MS and VMware and are scrambling to develop a ‘Chinese solution.’ It is a really hard problem. They will need 10s of 1000s of engineers, over multiple years, to engineer an alternative. Then find a way to lock it down and create a trade barrier with a ‘national ecosystem.’ Ha! The Chinese have been good at import substitution with a lot of things but software is not a strong point, especially large-scale systems. As for CT, like bellheads everywhere, they are going to have a really difficult time [figuring out] life-beyond-transport… With shared services they will start with storage and disaster recovery, maybe managed security. But that is a long way from server virtualization and cloud, or application services. You are right, though, they have to get started somewhere.” - IT expert
39Aliyun“We are catching up quickly, very focused, do not lack [for] connectivity of customer. We know what is missing, what needs must be fulfilled. What is important is that we would rather have 3 of the best cloud services instead of 5 mediocre ones.”“We are aiming for 1 billion RMB in revenue from Aliyun. We currently have less than 50,000 machines, we are shooting for 300,000 in the next months. We have more than 1000 developers.”[July 2012]
403rd-party IDCs (第三方IDC运营商) “To create a cross-cloud, cross-region, real-time application support network.”“Learn from the semiconductor industry how to [foster] value creation for the whole ecosystem. Greater China has become the foundry, the middle layer between commercial production and value-added design. We will play a role in the cloud akin to that played by a foundry and provide a basic foundation for cloud services, drop down the cost of innovation.”Conflict of interest? Financial resources?
41ISVs: Who will be the IBM of China ISVs: Who will be the IBM of China? SIs: Who will be the Huawei of cloud?