Analysts at McKinsey expect China’s public cloud market to triple in size in the next few years, from USD32 billion in 2021 to USD90 billion by 2025, as industrial and manufacturing companies shift their information technology workloads to the cloud, according to the consultancy’s latest report, which surveyed 278 decision makers in enterprise IT, digital and cloud from a wide range of sectors. “Digital transformation is strongly correlated with cloud adoption. By 2025, 78% of all IT workloads will be on the cloud in China”, said McKinsey Partner Shen Kai in a media briefing. In 2021, only 59% of IT workload was distributed on the cloud, according to the report. Cloud computing services enable companies to buy, sell, lease or distribute a range of software and other digital resources as on-demand services over the internet, just like electricity from a power grid. These resources are managed inside data centers.
The industrial sector will lead the next wave of cloud migration in China, taking over from consumer-facing firms, with 32% of its local IT workload expected to migrate to cloud by 2025, the highest among all sectors, according to the report. Ranked behind it are travel and logistics, retail and fast-moving consumer goods, and finance. “The future development of the cloud can help these industries to improve their overall productivity,” Shen said.
The report comes as China has been ramping up support for the digitalization of the industrial and manufacturing sectors. In its 14th Five Year Plan for 2021 to 2025, China set out a goal for digital transformation of the two sectors, with the adoption of industrial internet-platform applications to triple from 15% to 45% over four years. China’s tech giants are expected to maintain their leadership positions in the market. Currently Alibaba Group Holding, Huawei Technologies Co and Tencent Holdings lead China’s cloud market. “There is quite a big and obvious gap between the top three cloud vendors and other emerging or small vendors,” said Shen. “I think the top three positions will not likely change in the next five years assuming there is no major market consolidation, but there could be some adjustments in their relative shares.”
Alibaba, Tencent and Huawei, which together have more than half of China’s cloud computing market, have doubled down on their cloud businesses to fuel new growth as the tech giants weather hard times amid a slowing economy, weakening consumer demand and regulatory pressure. In the second half of 2021 Alibaba had 36.7% of China’s public cloud Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) market, with Tencent and Huawei accounting for 11.1% and 10.8% respectively, according to market research firm IDC. Analysts at McKinsey also noted that China has a higher proportion of private cloud, which is expected to reach 42% by 2025 compared with 36% for public cloud, the South China Morning Post reports.
