ChinaSoft prospers on growth of cloud computing in China

Microsoft distributor plays down benefit from Beijing's scrutiny of foreign players

PUBLISHED : Monday, 13 October, 2014, 12:44pm
UPDATED : Tuesday, 14 October, 2014, 3:09am

Although Microsoft Corp is among US technology firms caught up in Chinese security worries and antitrust probes, a local software company in which the Seattle giant is a strategic investor is riding high on the growth of cloud computing.

Chen Yuhong, the chief executive of ChinaSoft International, says its success owes more to Chinese firms' readiness to latch on to global trends like the cloud than from Beijing policies that have cut into orders from state enterprises for goods made by foreign players. Microsoft owns 5 per cent of ChinaSoft.

A leading Microsoft distributor in China, selling information technology systems and outsourcing services, ChinaSoft saw first-half profit jump 43 per cent to 115 million yuan (HK$145.4 million).

Founded as an US$81,000 start-up spun out of a government firm, the Hong Kong-listed company is now worth more than US$600 million.

"The biggest change has been the arrival of the cloud and the impact of cloud computing," Chen said.

China's spending on cloud services rocketed to 80.4 billion yuan in 2013, according to the China Software Testing Centre, and the market is expected to grow more than 60 per cent over the next three years.

The challenge for foreign technology firms "hasn't been China" per se, Chen said, referring to a perception that Beijing is unique in supporting Chinese technology companies and cloud services providers.

"All countries want [to secure] their most vital sectors with their own systems," said Chen, whose 15 per cent stake in the Beijing-based company is worth almost US$100 million.

Foreign companies, particularly US technology firms, have come under increasing scrutiny in China as Beijing pushes hard on information security. Firms from Microsoft to IBM have seen China sales slip as state-run firms take their business elsewhere.

ChinaSoft counts state-owned firms like China Mobile Communications Corp, State Grid Corp and China UnionPay as clients. E-commerce giant Alibaba Group Holding is a strategic partner. About 50 per cent of its revenue is tied to state firms and the government.

The company has set its sights on more than doubling its overall revenue to 10 billion yuan by next year.