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Why Service Providers Should Expand Their Business to China Now

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China has a fast-growing tech market. In November, market research firm IDC reported that the Chinese information, communication and technology market will reach 6 trillion by 2025 with an annual growth rate of about seven percent. Not surprisingly, the firm also reported China will become a world leader in many areas over the next 10 years, with cloud, big data and mobility playing a huge role. Global companies such as Dell, IBM and Huawei are investing hundreds of millions in Chinese cloud infrastructure and maybe your business should too.

The WHIR talked to Ray Zheng, the CEO of Shanghai Racent Internet Group to find out more about why companies are choosing to do business in China. His company offers business operation consulting and outsourcing service in China for hosting and cloud-related companies.

The WHIR: What do you see as the main reasons to begin doing business in China right now rather than waiting say a year?

Ray: China is a fast growing hosting market with close to 35 percent increase year over year. However, the Chinese hosting industry is about 3-5 years behind the US in marketing, which means there are still huge opportunities for US companies. It’s highly possible that local hosting companies will choose to adopt the latest technology in order to get more business and the local consumer would like pay for better hosting service.

The need is clearly there. if you don’t come, someone else will fill the needs for technology and infrastructure in the Chinese cloud and hosting market.

The WHIR: So many US businesses need global hosting and colocation services. Is this the same with Chinese companies? If so, are there ways US and EU companies can take advantage of this?

Ray: Yes, it’s the same. For example, Agora, one of the fast growing companies who offer real time voicing service world wide, deploy their servers in data centers in US, Europe, and more. As more and more Chinese companies become global, in order to better serve the local customers, they will need hosting services in data centers around the world.

The WHIR: Given that you think businesses should be taking advantage of doing business in China right now, what would be the best steps to follow to be successful in doing so?

Ray: Unless you have a lot of budget, leveraging some local business to test the water in the Chinese market would be the best way. It would be best to find a local company who could help with marketing and generating sales for your product. Actually, you can grow with your local partners in China and make it a win-win businesses.

One good example is Parallels, a leading technical company, who offers the Plesk control panel and Virtuozzo, who both partner with us to promote their service in China. By leveraging our strong hosting background and great relationship with local hosting companies, Parallels was able to quickly grow their market here.

However, if you are a big company with a lot of budget, then you should setup a branch in China and hire your own employees. In this case, I would recommend to considering big cities such as Shanghai and Beijing. Those cities in China would offer the best job candidates with with good English skills.

The WHIR: What are some of the greatest challenges to doing business in China and what are some ways companies can overcome them?

Ray: There are no doubt a few challenges for foreign companies looking to doing business here. It’s hard for outsiders to get ISP licenses from the government to offer hosting services in China. This could be resolved by finding a local hosting partners who could help you get the license. They could also deal with the government relationship while you offer the technology and solutions. This is what Microsoft Azure is doing in China Now.

Although it seems that the language barrier is strong, English is really popular in China especially in big cities like Beijing, Shanghai, etc. So, if you want to make recruiting easily, set up a branch in a large city.

Many people are worried about reverse engineering, especially after announcements from the Chinese government making it more difficult for foreign companies to business here. This is easy actually to deal with. Simply make sure you have put the appropriate terms in the contract with your local partners and of course include local attorneys in the negotiations.

The WHIR: Any final thoughts to companies looking to expand into the Chinese market?

Ray: While it seems daunting, having the right partners can help immensely. If your company is interested in doing business here, it may be worth attending HostingCon China. It’s a great conference to meet potential partners and get a feel for the Chinese market.

Although our audio interview with Mr. Zheng with some slight technical difficulties, the conversation was valuable. We’re offering it here with subtitles so you can still receive the information.

 

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