Microsoft just announced a significant hiring increase in China and a renewed commitment to offering its cloud computing services in the country. Amazon just announced a major expansion of its own cloud computing services, not in China, but rather in Northern Virginia, where the company reportedly signed a $600 million deal with the Central Intelligence Agency (CIA) two months earlier. These two announcements, which came just a day apart, are indicative of the two Pacific Northwest tech giants’ seemingly disparate approaches to the Chinese market. While Microsoft is building bridges across the Pacific in a very transparent fashion, Amazon’s China strategy remains difficult to discern.
Last Tuesday, Microsoft CEO Steve Ballmer announced that his company would be hiring several thousand new workers in China. The expansion, which comes on top of the Redmond-based software giant’s current population of 4,000 employees in the country, is aimed primarily at beefing up capacity in the cloud computing and Windows Phone services realm. In his press conference, Ballmer noted that China has become the fastest growing market for Windows Phone. Microsoft will also begin a public preview of Windows Azure, its corporate cloud computing service, in China next month.
Ballmer’s announcement aligns with a concerted effort by Microsoft over the course of the last year to increase its operational capacity in China as well as introduce more and more Chinese customers to its broad array of products and services. In September, the company announced that it would add 1,000 employees in China within 12 months and that it was significantly increasing its investment in China-based research and development. In October, Microsoft held its global release for Windows 8 in Shanghai and revealed that its Surface tablets would go on sale simultaneously in the U.S. and China. And in March, the company opened a flagship store on Tmall, China’s most popular business-to-consumer e-commerce platform. The store, which is operated by an all in-country team, offers access to more than 50 Microsoft products.
Microsoft, which lags far behind Amazon in terms of share of the public cloud computing market, has also become a trailblazer in the realm of Chinese cloud computing. Through a partnership with 21Vianet, a Chinese Internet data center services provider, the company became the first multinational to receive the necessary qualifications to offer its public cloud computing services in China. This development was among those inspiring prominent Beijing-based venture capitalist and Internet mogul Kai-Fu Lee to recently suggest that Amazon follow Microsoft’s path to break into the Chinese cloud computing industry.
All of these moves are demonstrative of the fact that Microsoft is doubling down on its commitment to China, a point encapsulated in the recent comments of Kevin Eagan, the company’s vice president for retail sales: “The future of the successful multinationals will take more of an approach that Microsoft is taking, which is to put their best people, build their best products and to launch their best products first in China.” Eagan’s remarks may be a bit hyperbolic as Microsoft’s leadership and profits are still anchored firmly in the U.S., but there can be no doubt that China looms large in the company’s present and future
The day after Microsoft, China cloud computing trailblazer, announced plans to hire several thousand employees in the Middle Kingdom, Amazon, global cloud computing trailblazer, announced its own expansion plans – in Northern Virginia. Amazon Web Services is opening a new office in Herndon, Virginia that is expected to hire 500 employees. AWS’s east coast expansion comes less than two months after Amazon reportedly inked a $600 million deal to offer cloud computing services to the CIA, whose Langley headquarters are in the same area. The publicity surrounding Amazon’s cloud computing work for America’s most famous intelligence agency isn’t likely to win the company plaudits in China, where CIA spies have infiltrated some of the state’s most important government organs.
Although the Microsoft and Amazon announcements are wholly unrelated, these developments underscore the major differences in the two companies’ respective approaches to China. Microsoft very openly champions its push into the Chinese market, has adopted market entry strategies that cater to the evolving Chinese consumer, and is continually unveiling new product and service offerings in the country. As for Amazon, its China strategy remains a mystery, the subject of frequent conjecture with little official corporate clarification. Rumors have dominated the conversation over when the Kindle will make its way to the mainland. (The latest report pegs the date as June 7.) The recent establishment of the Chinese version of the Amazon Appstore was a surprise to industry watchers as it wasn’t included in the company’s official Appstore expansion plan. And Amazon’s top China executive resigned in November, with Chinese publications reporting that authority for the company’s in-country operations had already been stripped from his hands.
Amazon executives remain sanguine about their prospects in China, a sentiment exemplified by CEO Jeff Bezos’ comments at the company’s shareholders meeting last week: ”Customers want big selection, low prices, fast delivery, great customer service. That’s what we’re delivering in China.” Meanwhile, the core of Amazon’s international stardom – e-commerce and cloud computing – has not translated into success in the country. Amazon accounts for less than one percent of the Chinese e-commerce market and its cloud computing services have not yet been introduced to the country.
Though it remains too early to judge if Microsoft’s push into China will yield bigger profits, it is clear that the company is advancing confidently into the Chinese market. Many analysts, meanwhile, maintain pessimism regarding Kindle’s prospects in China, believing that Amazon may have waited too long to release it, and say that “Amazon has already missed the bus” when it comes to e-commerce. With the AWS expansion burgeoning outside of Washington D.C., but absent in Beijing, will Amazon miss the bus on China’s quickly growing cloud computing industry as well?
Editor’s Note: contextChina is a Seattle-based media company following the growing impact of China on the Pacific Northwest across business, technology and policy. You can follow contextChina on Twitter @contextchina.