Google scraps cloud initiative in China and other ‘sensitive markets’

Google abandoned plans to offer a major new cloud service in China and other politically sensitive countries due in part to concerns over geopolitical tensions and the pandemic, according to two employees familiar with the matter, revealing the challenges for US tech giants to secure business in those markets.

In May, the search giant shut down the initiative, known as “Isolated Region” and which sought to address nations’ desires to control data within their borders, the employees said. The action was considered a “massive strategy shift”, according to one of the employees, who said Isolated Region had involved hundreds of employees scattered around the world.

Alphabet’s Google is pouring money into cloud computing, part of a broader effort to find new sources of growth beyond search advertising.

Google Cloud generated US$8.9 billion in revenue in 2019 – a 53 per cent increase over the previous year – as it has pushed into sectors such as finance and government that require special security clearance and features that shield confidential data. Rivals Microsoft and Amazon already offer these capabilities via their cloud units.

Google’s recent decision to nix the Isolated Region project was made partly because of global political divisions, which were exacerbated by the Covid-19 pandemic, according to the two employees, who requested anonymity because the project has not previously been made public.

The initiative would have allowed Google to set up cloud services controlled by a third party, such as a locally owned company or a government agency. The result would be a business sequestered from Google’s existing cloud computing services, which include data centres and computer networks.