54 Business The EconomistJanuary 20th 2018
12 model. In November, Google announced
an addition to TensorFlow, itsAI technol-
ogy, which allows developers to deploy al-
gorithms to mobile devices.
But in many cases even the training of
algorithms must happen locally forAI ap-
plications to make commercial sense, ar-
gues Simon Crosby, chief technology offi-
cer of Swim, a startup. For instance,
sending the four terabytes of data generat-
ed daily by traffic lights at intersections in
Palo Alto, in Silicon Valley, to a cloud pro-
vider for processing would cost thousands
of dollars a month. Swim has built a sys-
tem that does the equivalent job for few
hundred dollars by learning from the data
on the fly as they are generated.
Although a shift to the edge is now gen-
erally acknowledged to be under way,
opinions are divided over how it will
change the technology industry. Nobody
expects the “end of cloud computing”, to
quote the provocative title of a podcast by
Peter Levine of Andreessen Horowitz, a
leading Silicon Valley venture-capital firm.
He himself predicts thatcentralised clouds,
in particular those of Amazon, Google and
Microsoft, will continue to grow.
But smaller and more local data centres
are springing up everywhere. Firms such
as EdgeConneX and vXchnge have built
networks of urban data centres. Vapor IO,
a startup, has developed a data centre in a
box that looks like a round fridge and can
be quickly put in any basement. Makers of
telecoms equipment, including Ericsson
and Nokia, as well as network operators,
talk a lot about “mobile edge computing”,
which amounts to putting computers next
to wireless base stations or in central
switchingoffices. Some also speculate that
one reason why Amazon last year bought
Whole Foods, a chain of groceryshops, for
nearly $14bn, was to accumulate property
for local data centres.
Computer makers see the shift as a
chance to regain lost territory. Dell EMC
and HPboth want to sell more gear to firms
keen to crunch data locally. But they are
limited in how far they can move to the
edge, says George Gilbert of Wikibon, a
consultancy. These firms know how to sell
commodity hardware to ITdepartments,
but mostIoTgear will be more custo-
mised, requires special software and is
sold to people managing machinery. Cis-
co, which sells all kinds of internet equip-
ment, seems well placed.
Big cloud-computing providers are also
trying to colonise the periphery. In May
Microsoft changed its slogan from “mobile
first, cloud first” to “intelligent cloud and
intelligent edge”. It sells services that dis-
patch software containers with AIalgo-
rithms to any device. AWS’s portfolio now
includes a service called Greengrass,
which turns clusters ofIoTdevices into
mini-clouds. In buying the Weather Com-
pany for $2bn in 2015, IBMwanted weatherdata, but also thousands of “points of pres-
ence” for edge computing.
Whoever prevails, computing will be-
come an increasingly movable feast, bits of
which can be found in even the smallest
devices. Processing will occur wherever it
is best placed for any given application.
Data experts have already started using an-
other term: “fog computing”. But the meta-
phor is a bit, well, foggy. Better, and more
poetic, would be “air computing”: it is
everywhere and gives things life. 7W
HICH of the world’s tech giants
boaststhe fastest-growing comput-
ing cloud? Many would guess either Ama-
zon or Google, which operate the world’s
largest networks of data centres, but the
correct answer is Alibaba. In 2016 the
cloud-computing business of the Chinese
e-commerce behemoth grew by 126%, to
$675m. Growth is unlikely to slow soon. Si-
mon Hu, president of Alibaba Cloud,
wants it to “match or surpass” Amazon
Web Services (AWS) by 2019.
That is a stretch: AWSis estimated to
have generated revenues of about $17bn in- But Alibaba’s cloud (known locally as
Aliyun) is one of a thriving group: China’s
cloud-computing industry asa whole is
growing rapidly. Even more intriguing than
its speedy expansion is the fact that Chi-
na’s cloud is different to that of Western
firms in important ways.
The technology that China’s cloud-
computing providers use is not so dissimi-
lar. Indeed, the fact that Western tech firms
have released much of the necessary code
as open-source software made it easier for
them to get going. “That brought us to the
same starting-line,” says Xilun Chen, the
chief executive of EasyStack, which builds
clouds for many Chinese firms.
What varies is how the technology is
used—a result of the respective roots of
cloud computing. In the West the first cus-
tomers were startups and only later, bigger
firms. In China the cloud grew out of con-
sumer services, including Taobao, Ali-
baba’s e-commerce marketplace, and the
online games offered by Tencent, the sec-
ond-biggestonline firm. As a result, many
cloud services are not yet ready for com-
plex, mainstream corporate applications,
says Evan Zeng of Gartner, a research firm.
As these services develop, however,
there is huge potential. In the West almost
all firms have long had sophisticated in-
house information-technology systems,
which many are hesitant to abandon. In
contrast, the ITof most Chinese companies
is underdeveloped. “They can jump di-
rectly to the cloud,” says Ji Xinhua, the
founder and chief executive ofUCloud, a
smaller but fast-growing cloud provider.
Another divergence stems from regula-
tion. Whereas in the West organisations
such as government agencies and financial
firms often share data centres with other
customers, in China there are separate “in-
dustry clouds”. Banks, for instance, are en-
couraged to sign up for services provided
by outfits such asCIBFinTech, a spin-off
from China’s Industrial Bank, because it re-
flects the latest regulations and makes
things“more convenient” for regulators, in
the words of its boss, Chong Chen.
And whereasAWS, Microsoft and Goo-
gle already rule the Western roost, the
eventual cloud leaders in China are as yet
unknown. Alibaba, China Telecom and
Tencent are ahead (see chart on nextpage),
but that could change, says Mr Zeng. Hua-
wei, a maker of telecoms gear, has ambi-
tious plans. Smaller players, such as
UCloud, may catch up.
Whichever firm ends up leading, Chi-
nese and Western cloud providers are
bound to run into each other—though not
so much in their home countries as in such
places as Europe and India. AWSand its
main rivals have been busy building data
centres abroad for some time, including in
China. But Alibaba and Tencent are catch-
ing up. Alibaba, for example, operates a
dozen computing plants abroad and will
open another one this month in India, near
Mumbai. “We have taken on Amazon on
all fronts,” saysAlibaba’s Mr Hu.
On the face of it, Western clouds should
be able to stay ahead. They are still far big-
ger and have a technological edge, for in-
stance in specialised chips to crunch reams
of data for artificial-intelligence services.
The reluctance to use Chinese technology
is growing, and not justin America. But the
Chinese competitors have some advan-Computing geography (2)Great cloud of
China
SHANGHAI
Chinese tech companies plan to steal
American cloud giants’ thunder