September 1, 2022
BEIJING – China’s next wave of cloud migration is expected to be spearheaded by critical industrial and manufacturing sectors, and the country’s public cloud market will more than double from $32 billion in 2021 to $90 billion by 2025, said global management consulting firm McKinsey& Company.
According to the latest report from McKinsey, despite a relatively late start, China has made enormous progress in terms of cloud migration speed and has become the world’s second-largest cloud market.
Over the next few years, the speed of cloud migration in China will be broadly in line with the rest of the world, with a 19-percentage-point increase expected in IT workloads shifting to the cloud between 2021 and 2025.
However, China differs from other countries in its high proportion of private cloud, which is expected to reach 42 percent by 2025, compared with 36 percent for the public cloud.
McKinsey’s survey suggested that only 11 percent of the companies surveyed plan to be mostly on the public cloud. The remainder will continue to use a private cloud with traditional servers or use a hybrid cloud.
“Cloud adoption is strongly correlated with digital transformation. By 2025, 78 percent of all IT workloads will be on cloud in China,” said Kai Shen, partner at McKinsey. “But when we look across the cloud adoption of business use cases with P&L impact, we find that adoption rates are much lower at between 0 percent to 25 percent.”
P&L is an indicator that can show a company’s ability to increase its profit, either by reducing costs and expenses or increasing sales.
“It demonstrates that Chinese companies still have enormous opportunities to develop, adopt and scale use of cloud, for example in dynamic pricing and personalization, digital twins and three-dimensional simulations, sales forecasting and inventory optimization,” he said.
In terms of industries, the report also pointed out that sectors with numerous tech-savvy and digital-native companies, such as e-commerce and education, have already shifted a significant portion of their IT workloads to the cloud in China.
Labor-intensive industrial and manufacturing sectors, on the contrary, have not done that. But that could quickly change given the latest national policy guidance, it added.