China’s cloud price war will change cloud strategy for infrastructure and operations

In recent years, China's hyperscale cloud providers have faced fierce competition from other global and local cloud providers. These vendors strive to attract more customers through price cuts to capture a larger share of China's cloud market. In the past, cloud providers have successfully avoided price wars. However, as the growth of China's cloud market slowed down, in order to continue to expand market share and maintain the growth of cloud business, cloud providers eventually embarked on the path of price reduction.

Facing market challenges, cloud providers will have to focus on product differentiation, innovative technologies, service quality improvement and cost optimization of cloud platform operations. I&O leaders should pay attention to the impact of market dynamics, take advantage of market opportunities to optimize cloud costs and make flexible technology choices to accelerate cloud migration. But at the same time, we must also be alert to the risks and pitfalls that may arise.

By properly avoiding potential risks, I&O cloud costs will be reduced

On the premise of properly avoiding potential risks, I&O leaders are expected to benefit from the price reduction strategies of Chinese cloud providers, reducing cloud costs and improving cloud efficiency.

As the price war gradually escalates, more cloud providers will join the competition in the short term. Overall price declines in the cloud computing market are to be expected. However, because of the existence of proprietary contract discounts, unit price reduction does not guarantee a net price reduction; since the total cost is affected by two factors: price and consumption efficiency, it does not guarantee a long-term total cost of ownership (TCO) price reduction.

The price-cut products are mainly infrastructure-as-a-service (IaaS) products, and also include a small number of platform-as-a-service (PaaS) and software-as-a-service (SaaS) products. In China, IaaS products have been widely adopted in cloud migration and application development, so the I&O team can save a lot of costs on computing (virtual machines), storage and other products and services during the cloud journey.

I&O risks caused by suppliers withdrawing from the cloud computing market

Many small cloud providers entered the cloud market early and occupied a certain market share in specific industries. As market competition intensifies, some businesses may not survive, especially when other hyperscale businesses lower the prices of their products and services. I&O leaders using the products and services of these cloud providers face significant risks, including digital business disruption, failure of cloud migration strategies, and spillover costs of migrating current workloads to other infrastructure. I&O leaders considering using such vendors should evaluate not only the vendor's product and service capabilities, but also the health of their cloud business.

Verify the authenticity, scope, duration and market sector of price reductions

Some cloud vendors' price cuts may be just trivial bandwagon moves, such as price cuts being limited to specific products or services that are insignificant to the I&O's cloud strategy. In addition, there are also issues such as resource capacity may be limited and unable to effectively support I&O needs, or the price reduction strategy is only applicable to the Chinese market.

Enhance I&O digital capabilities through multi-cloud/hybrid cloud

Price reductions encourage I&O teams to adopt multi-cloud deployment methods and increase workload configuration flexibility based on global business needs to procure differentiated products and innovative technologies.

Chinese companies use digital technology to improve productivity and quality and upgrade their industrial capabilities, with the goal of enhancing their market position and global business resilience through the above measures. To address the many limitations of a single cloud provider, I&O leaders can choose other cloud providers outside of the primary cloud providers to build multi-cloud environments and enable business innovation.