BEIJING, 5 FEBRUARY 2010 - A fledgling Shanghai company aims to tap rising demand for back-end IT services in China, where red tape and other woes can make it complex to operate in the country's booming Internet industry.
China claims more Internet users than the U.S. has people, but its Internet companies face a host of challenges unique to the country. Parts of China's Web infrastructure remain poorly connected, and regulators can punish companies if users upload pornography or other sensitive content to their Web sites.
But another key challenge is that the Internet's fast growth has boosted the need for workers with experience managing back-end servers, while those skills remain scarce, said Steve Mushero, cofounder of ChinaNetCloud. Mushero used to work as CTO for Tudou, a Chinese YouTube rival.
"There are a lot of complications that you just don't see in the rest of the world," Mushero said. "There's a huge shortage of trained and experienced professionals, and things are fast."
ChinaNetCloud manages back-end servers and cloud infrastructure for customers. The company will operate a customer's private servers or provide it with servers running virtualization software, like Amazon.com does with its cloud service, that ChinaNetCloud then manages for the customer. The company, which was founded in 2008, has grown to nearly 40 employees and could reach 100 by the end of the year, Mushero said.
China says 384 million people in the country used the Internet in the second half of last year. Broadband penetration is high and many Internet users are young, so industries like social networking and online gaming have soared in the country. Examples of big Chinese Internet companies include search engine Baidu.com and portal Tencent, which rakes in revenue from selling virtual goods like clothing and pets to players of its online games.
Many of ChinaNetCloud's customers are online gaming companies, partly because they often need to find more servers quickly if a popular new game starts reeling in many users, Mushero said. A company in such a situation can scale up quickly by starting to use servers from a cloud, which ChinaNetCloud can provide, he said. The company also serves enterprise customers.
The growth of Internet companies is helping fuel China's IT services market. That market is set to grow by at least 20 percent each year for the next few years, said Jens Butler, a principal analyst at Ovum. Incentives from the Chinese government such as tax breaks and investment in technology parks are also boosting the sector, Butler said.
Internet companies face more practical challenges in China than they might in a developed market like the U.S. One challenge is that China's major communication networks are not well connected, including the two networks that separately cover the northern and southern parts of the country, Mushero said.
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