Cloud in China: The outlook for 2025

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After a relatively slow start, China has made rapid strides in migrating to cloud computing and now has the world’s second-largest market after the United States. China’s public cloud is expected to more than double in size in the next few years, from $32 billion in 2021 to $90 billion by 2025.1

To date, China’s cloud adoption has been led largely by consumer-facing companies, which need elastic, on-demand access to unlimited computing power to help them respond to huge fluctuations in customer demand. During China’s Singles’ Day shopping festival, for instance, e-commerce traffic, transactions, and gross merchandise volumes can reach up to 30 times normal daily levels. Popular live-commerce shows with real-time purchasing and audience interaction also make enormous demands on computer infrastructure. The streaming room of top influencers can have up to 100 million views and over $1 billion in presales in a single day.

Consumer-driven growth will remain an important driver of cloud adoption, but we believe the next wave of migration could be spearheaded by China’s critical industrial and manufacturing sectors. To better understand the developing cloud landscape in China, we surveyed 278 decision makers in enterprise IT, digital, and cloud from a wide range of sectors, and derived insights about where business value is likely to be created in the next few years (see sidebar, “About the research”).

Private cloud remains prominent in China’s hybrid and multicloud future

As consumption increases, private cloud will retain an edge over public cloud in China.
China’s cloud future will be hybrid and multicloud.

The two most important sectors economically lag in cloud adoption

Cloud consumption will increase across the board, but with variations by industry.

Business growth is the biggest reason for migration

The most common reason for migrating to cloud was wanting to scale fast to support business growth.

The biggest barrier to migration is the perceived difficulty and cost

Three main barriers kept respondents from adopting cloud.

Cloud leaders have more than 70 percent of their IT workloads on the cloud

Followers and laggards are poised to ramp up cloud adoption.

Internal business-facing functions have the greatest gaps in cloud adoption

Cloud-adoption rates vary considerably within and between business functions.
Cloud-adoption rates also vary significantly by business domains within functions.

Key industry-specific use cases with direct business impact offer the greatest potential for cloud pull-through

An analysis of adoption by domain and industry reveals huge opportunities to create value from innovative cloud use cases.

Top Chinese CSPs lead the market, but global CSPs still have substantial value pools to address

Executives broadly agreed on the top buying factors and ratings for CSPs.

What enterprises and CSPs can do to accelerate cloud journeys

Businesses wanting to accelerate their shift to cloud and capture some of the more than $1 trillion of value at stake need to ensure that they take the right approach and put key enablers in place. Following are some of the most important steps:

  • Target investments at business domains where cloud can enable revenue and margin improvements. In our experience, carefully selecting applications within a specific domain to move to the cloud and sequencing these moves thoughtfully delivers far more business benefit than a wholesale “lift and shift” approach aimed at cutting IT costs. Applications should be aligned to specific business cases and quantifiable business value so they can be prioritized and tracked.
  • Set up a governance model that facilitates collaboration between IT and the business. To manage the strategy and governance of their cloud migration, successful companies create a business-execution office comprising business, finance, and technology leaders, who are jointly responsible for delivering the migration and defining business value, key performance indicators (KPIs), migration paths, economic models, and prioritization criteria. The business-execution office is often supplemented by a cloud center of excellence made up of engineers, architects, and product designers. Their role is to design the foundational reference architecture, translate migration scenarios into deployable archetypes, integrate modern ways of working into a cloud-native operating model, facilitate rapid adoption across the business, and champion site-reliability engineering to optimize the cloud’s operational efficiency.
  • Build a cloud-native operating model to unify and standardize infrastructure management and technology delivery. To prevent legacy IT processes, manual interventions, and multiple handoffs from impairing migration speed and quality, successful companies redesign the entire technology-delivery process. They reengineer every step—from architecture design and infrastructure-resource provisioning, through application development, testing, and deployment, to production, monitoring, and incident handling. They also ensure that the new processes are highly automated and have extensive self-service functionalities to provide a seamless developer experience.

For their part, global CSPs seeking success in the Chinese market could target sectors where they can bring global best practices to bear and offer a suite of technology solutions to accelerate business value creation. They could help clients to define their cloud target state, focus on how to create value, plan a clear migration route with separate paths for legacy and modern applications, manage a hybrid model during the transition, and support private- and public-cloud operations thereafter. Along with local CSPs, system integrators, ecosystem technology providers, and coaching and change-management firms, they will also participate in cloud ecosystems to build technology solutions that improve outcomes for Chinese businesses.

China’s cloud migration is now entering its second wave. Adoption in the next few years will be driven by the introduction of an array of industry-specific solutions to improve business performance.

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