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Legacy IT v Cloud Computing in China

The Mindset Must Move from the Mantra of "Price, Price, Price"

"How are we supposed to rip out millions of dollars of legacy IT and replace it with Cloud?"

This question came from a petrochemical industry executive in China, during a get-together of a few hundred IT managers in Beijing in late March.

He was speaking in Mandarin, so I'm reporting the spirit of what I heard in translation. You can ask Rosie O'Donnell, Shaquille O'Neal, or that young ex-UCLA student how it sounded in the original.

Send in the Clouds
China has included Cloud Computing in its 12th Five-Year Plan, which starts this year. (I had forgotten they still had these.) But its Ministry of Indusrty and Information Technology (MIIT) has not yet offered a Cloud Computing definition. It promises to do so this year.

To an American observer, the oil exec's question seems easily answered: you're not supposed to do this. Instead, virtualize resources, start metering them, and deliver them as services within the context of a self-contained, on-site private Cloud.

But this answer doesn't fly in China. I've already heard some rumbling that Chinese executives are hearing pitches about "cloud solutions" as one-sided affairs that will transfer money to the vendors, but offer no real performance benefits. They're also suspicious of "Vendor Lock-in 2.0."

The other side of this coin is China's appalling reputation for ignoring and violating American copyrights and purloining intellectual property. And then there is the unceasing refrain about price.

The Price is Trite
I've grown weary of hearing businesspeople in Taiwan and China-dating back to my first visits to the region in 1987-emphasize price, price, and price. An attendee at the Beijing get-together noted that technology looks expensive in China when compared to still-low human labor costs. "It may look inexpensive in North America, where employee costs are very high, but it is a different story here," he said.

A speaker from a company exhibiting in Beijing told the audience, "if the price is too high, then just say 'no,' and wait for it to come down. It is the vendor's responsibility to meet your needs." But listening between the lines, it was clear that he wasn't going to waste a lot of time on people who simply don't want to pay for something at any price.

China is now sitting at the adult's table-in fact, it owns a big section of the adult's table-and its government leaders and businesspeople must start thinking like real IT executives in the developing world.

Do You Believe in Miracles?
China's leaders have wrought an economic miracle since the reforms of Deng Xiaoping in 1980 that rivals those of Germany, Japan, and South Korea. If you adjust its economy for local pricing, its gross domestic product (GDP) is now two-thirds of that of the United States.

At present growth rates-8.9% for China, 2.8% for the US-China could possess the world's largest economy in local terms as early as 2018, and in real terms as early as 2028.

I don't think this will happen. China's momentum will slow if it doesn't start transforming itself more aggressively from a massive exporter to more of an importer, and stimulate the world's developed nations in the process by importing from them. And I don't think it will make this transition quickly enough to sustain its rapid growth.

US consumers, for example, still control 17% of the entire global economy-if their unemployment rates stay sky high much longer, they won't have money to buy anything more from China.

Additionally, China has not been an aggressive IT deployer. It does rank #3 in the world, behind only the US and Japan, in total IT expenditures (according to World Bank figures). But it doesn't make the top 25 in terms of what it spends on IT as a percentage of its overall economy.

China needs to step up its game when it comes to IT, and its leaders need to get off the schneid to talk about something other than price. If this were to happen, the US economy will benefit by selling Cloud technology into China. If not, we can only hope that the US economy finds other customers for its stuff, as we watch China rapidly lose steam.

More Stories By Roger Strukhoff

Roger Strukhoff (@IoT2040) is Executive Director of the Tau Institute for Global ICT Research, with offices in Illinois and Manila. He is Conference Chair of @CloudExpo & @ThingsExpo, and Editor of SYS-CON Media's CloudComputing BigData & IoT Journals. He holds a BA from Knox College & conducted MBA studies at CSU-East Bay.

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