ChinAI #339: China's Cloud Ecosystem Enters its (much-needed) Governance Phase

2022-03-07 · Source: ChinAI Newsletter · Field: Technology & Digital — Artificial Intelligence & Machine Learning, Cloud Computing & IT Infrastructure · Depth: Intermediate, quick

Summary

China's cloud computing market is experiencing intense competition driven by "commission rebates," where resellers return a significant portion of their commission (often 60-70%, sometimes up to 83%) to new customers to secure sales. This practice, detailed in an AItechtalk article, creates a race-to-the-bottom scenario, making it difficult for resellers to invest in long-term AI-era capabilities and forcing them into unsustainable arbitrage. Customers prioritize price over performance, and large cloud providers neglect genuine partnerships in their pursuit of market share. The article suggests the market is entering a "governance phase," evidenced by Huawei Cloud's "integrity oath" for partners, internal anti-corruption campaigns, and stricter agent communication protocols, aiming for a cleaner, more sustainable ecosystem for future AI diffusion.

Key takeaway

For Directors of AI/ML evaluating cloud infrastructure in China, understand that the current market's "commission rebate" chaos can undermine long-term value creation and partner capabilities. Prioritize cloud providers demonstrating commitment to a "governance phase" with transparent, ethical practices over those solely focused on short-term price advantages, as this indicates a more sustainable ecosystem for your future AI initiatives.

Key insights

Unsustainable commission rebates in China's cloud market hinder long-term AI ecosystem development, prompting a new governance phase.

Principles

• Price wars can exclude capable partners.
• A clean ecosystem is crucial for long-term growth.

Method

Cloud market governance involves integrity oaths, multi-level approvals for agent visits, and rectification campaigns, including anti-corruption measures and stricter communication protocols.

In practice

• Implement integrity oaths for sales partners.
• Conduct internal anti-corruption campaigns.
• Require company email for supplier/procurement communication.

Topics

• Cloud Computing Market
• Commission Rebates
• AI Ecosystem Governance
• US-China Academic Relations
• Graduate Student Admissions

Best for: Director of AI/ML, Business Analyst, Policy Maker

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Editorial summary, takeaway, and curation by AIssential. Original article published by ChinAI Newsletter.