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ADVISORY

The State of the Nation Cloud Computing China


November 2010

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

What we see?

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

Gartner Analysts believe that China IT spend will be USD 216.7 billion in 2010 representing 6.7% of the overall global spend

IT Spend in China during 2010


2010 Spend Computing Hardware Software IT Service Telecoms Total 43 6.2 9.4 158.1 216.7
Figures in Billions of U.S. Dollars

Source: Gartner (2009)

Source: Gartner (January 2010)

Focus: Cloud computing addresses the costs of hardware, software, operational services and telecommunication in one single budgetary number

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

IDC Predictions on cloud spending in 2008 see a $16.2 billion (US) spend rising to an anticipated $42.3 billion (US) globally

Focus: there is anticipated large growth in the storage market China may have to address information privacy issues in order to take advantage of this.

Cloud Market: Anticipated Grow th

Source: IDC (2008)

160 140 120

Gartner believe global Cloud market is much bigger with a global potential of over $150 billion (US) globally in 2013.

100 80 60 40 20 0 2009 2010 2011 2012 2013


Source: Gartner (2009)

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

To meet these levels of spending in technology, investment in the cloud is spiking with key initiatives underway for many key players
The Taiwan government plans to spend NT$24billion (US$743Million) over the next five years Microsoft plan to spend part of a US$500million research budget on cloud computing in China US$100 million from RIM in China Mobile and China Telecom

China Mobile will invest an estimated CNY400 billion (US$58 billion) over 3 years in their Big Cloud 3G platform

Alisoft invest CNY100 million (US$13.5 million) in Nanjing centre

Source: Recent press on cloud investment

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

What people are saying on cloud and impact on china?

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

The market is accelerating with big players investing in China to deliver and enable cloud services within Chinas boundaries

Infrastructure as a Service

Platform as a Service

Software as a Service

Cloud Enabler

Jiangxi Fujian

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

What are people saying?

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

NIST have provided the industry with a non-ratified but generally agreed definition of cloud computing

Essential Characteristics

Broad Network Access


standard access via generic heterogeneous clients

Rapid Elasticity
quick response to new scaling requirements; purchasing based on immediate requirements

Measured Service
abstracted metering at business level delivers an optimised service

On-Demand Self-Service
computing requirements automatically delivered at consumers request

Resource Pooling
dynamic allocation determined by service requirements

Software as a Service (SaaS)


Service Models
consumer accesses and uses the providers applications on a cloud infrastructure supported and maintained by the provider

Platform as a Service (PaaS)


consumer deploys and maintains its own applications on a cloud infrastructure supported and maintained by the provider

Infrastructure as a Service (IaaS)


consumer is able to provision computing components (e.g. networks, storage) that it can use to support its applications and operating environment

Deployment Models

Software developers in China are looking to use SaaS as a route to market

International and Chinese organisations are currently investigating PaaS and IaaS for expansion and cost optimisation

Public
available to the general public and thus to any service provider for any type of service requirements

Private
dedicated service either on the consumers site or hosted by a third party

Community
a shared environment with a group of consumers with similar service requirements

Hybrid
a composition of two or more clouds, public, private and community, that are able to enable data and application portability

Source: NIST Definition of Cloud Computing v15 (2009)

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

Using the cloud is not without its risks and obstacles but solutions are available in some areas which can seek to overcome these issues

Areas of Concern Business


9 1
Availability of Service

Solutions and improvements


Use multiple providers, reducing risk of loss of service Elasticity reduces the threat of Denial of Service (Essential Characteristic) Standardised APIs for ease of migration and flexible delivery Remove Single Points of Failure from dedicated solutions Deploy encryption at the data level Accommodate National laws via geographical data storage Physical rather than digital for major data transfers Increased bandwidth on LAN and GWAN environments Improved Virtual Machine (VM) support and hardware architecture (reduced I/O) Improved scheduling and provisioning of VMs (Essential Characteristic) Develop truly dynamic and scalable storage systems for all information requirements Develop software development solutions that are customised for cloud computing environments Develop scaling solutions that utilise machine learning to maximise performance enhance with effective use of snapshots Offer reputation guarding services or utilise a private cloud (Deployment Model) Alternative charging strategies but requires governance around usage demonstrable control
Source: Above the Clouds: A Berkley View of Cloud Computing (February 2009)

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Data Lock-In

3 1 4 5 2 3 6 5 8 7 6 4

Data Confidentiality and Auditability Data Transfer Bottlenecks Performance Unpredictability

Technical

Scalable Storage Bugs in Large Distributed Systems Scaling Quickly

Adoption

Growth
7

8 Solutions exist, although may not always be included in solutions offered Solutions tend to not exist or have a low maturity and adoption; potentially a China specific issue

Reputation Fate Sharing

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Software Licensing

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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KPMG have found that further areas are impacting the take up of cloud based services

Areas of Concern Business


9 15 11 10 16 17 12 1 4 5 11 3 2 14 6 8 13 7 14
Latency of connections Ease of integration

Solutions and improvements


This is not an obstacle specifically of cloud computing and solutions have been tried and tested; a complexity not an issue

Ability to customise services

Deployment models such as hybrid and private allow for heavy customisation (Deployment Model)

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Technical

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Provider Maturity

This is a factor of time and providers are improving services, solutions and infrastructure significantly

Bandwidth improvements can ensure delivery of information but time-sensitive applications may require response times quicker than is physically possible

Adoption

Growth

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Regulations

Cross border processing and storage of information remains an issue and can only be addressed through combination of business and technology

16 Solutions exist, although may not always be included in solutions offered 17 Solutions tend to not exist or have a low maturity and adoption; potentially a China specific issue

Governance of services

With greater flexibility comes a greater need for understanding the impact of change and a new approach to IT management is needed

Measurement and monitoring

Developing and reporting on quality indicators within a model that can be understood by the business is a challenge although monitoring of cost is achieved (Essential Characteristic)
Source: KPMG Cloud computing: Australian lessons and experiences (2009)

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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Providers are addressing the concerns of consumers to varying degrees with improvements in technology and solutions

Confidentiality & Auditability

Measuring & monitoring

Performance Unpredictability

Bugs in distributed systems

Data Transfer Bottlenecks

Latency of connections

Scalable Storage

Regulations

Reputation fate sharing

Provider maturity Ease of integration

Availability of Service

Governance of service Data Lock in Software licensing Ability to customise Scaling quickly

Source: IDC (2008) and KPMG analysis (2010)

Common concerns amongst consumers


2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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China needs to understand the big issues

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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In 2008 Gartner predicted that Cloud Computing was gaining in hype and was 2 - 5 years away from mainstream adoption

Cloud Computing in 2010

In 2010, Cloud Computing is reaching its peak in visibility with many international conferences coming to China

Source: Gartner (July 2008)

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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Providers have been working to meet the expectations of consumers to varying degrees in China

Large network of partners

Address multiple IT issues Complete Solution offering Well established providers

Performance assurances Innovative solutions

Understand Industry needs

Competitive pricing Fallback to onsite delivery

Existing provider relationship Local presence

Source: IDC (2008) and KPMG analysis (2010)

Common expectations amongst consumers


2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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Cloud computing is not the only tool available and the benefits it brings should be considered alongside other strategic directions

Combining Outsourcing, Shared Services and Cloud Computing together can provide greater benefits than on their own

Internal adoption and support of Cloud Computing is unlikely to be successful without business alignment

Sweet Spot
Cloud Computing
Achieving improvement by business transformation from within and integrating Cloud technologies

Outsourcing
Achieve efficiencies from economies of scale provided by third parties who themselves are embracing Cloud Computing

Shared Services

Most strategic roadmaps will not be a straight line, but will be affected by the point in time desire to implement all three solutions
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2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

Major internal shared service centres in China this is a small sample they are talking about cloud

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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Major R&D centres in China use of the cloud to drive greater innovation
MNCs have set up over 1,200 R&D centres in China

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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Service providers in China many are starting to develop cloud solutions and products
There were over 9,000 outsourcing service providers in China by January 2010, whose delivery centres scattered in the Service Outsourcing Model Cities

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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The profound change

China is on the move

Chinese Government has a bold vision of the impact of Cloud Computing Major Chinese entities are putting significant investments into Cloud These massive investments will drive Significant innovation

Look North and dont discount what China will do here in cloud

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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Speaker

Egidio Zarrella Clients and Innovation Partner in Charge KPMG +852 6393 0458

2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.

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