Google Cloud in China scrapped over political reasons

It appears that the Google Cloud rollout for China was scrapped because of geopolitical reasons, according to employees familiar with the issue.

Two employees with insider knowledge of the deal recently said that Google Cloud scrapped its China plans because of politics. They added that tech companies from the U.S. find it hard to find traction in that part of the world.

It appears that Google shut down its initiative known simply as Isolated Region. The initiative aims to help nations control all data that passes in and out of its borders. The insiders claim that this is one of Google’s biggest shifts in international business strategy.

Huge investments into the cloud

It is no longer a secret that Google’s parent company, Alphabet Inc., is building a massive cloud business. The tech giant is pouring huge amounts of resources in an effort to find new revenue streams outside of advertising. The tech giant many have finally found it, and Google Cloud generated more than $8 billion in revenue last year.

In terms of growth, the revenue represents a 54% growth compared to its last performance in 2018. The platform managed to encompass many sectors, including finance and government operations. The latter is extremely important as it provides special clearances to secure confidential government data.

In terms of competition, Google is relatively new to this market. Microsoft and Amazon are already well-established in the cloud industry. The Amazon Web Services control 33% of the cloud market, with Microsoft Azure securing 18% of it.

What went wrong

The decision to scrap the China expansion of Google Cloud has more to do with geopolitics than anything else. China is viewed as an authoritarian regime that wants full control of all data in the country. Google has failed to capitalize on the country and was forced to exit it many years ago.

The Isolated Region initiative aims to create a workaround by Google, setting up its cloud services through local subsidiaries. The idea was to set up Google Cloud through a third-party controlled by a government agency or a locally-owned firm.

Early in 2019, the United States and China were plunged into a bitter trade war that saw trillions of tariffs. At this point, Google deemed that its Isolated Region initiative is in jeopardy.
Instead of focusing on China, the Google Cloud initiative turned its eyes towards Europe. Aside from Europe, Google also has cloud projects in the Middle East and some parts of Asia.

Image courtesy of Mitchell Luo/Unsplash

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