Microsoft Azure official Microsoft

Microsoft has big plans for its cloud computing platform in China. CEO Satya Nadella was in the country on Wednesday to announce an expansion with its Chinese partner, 21Vianet. The company handles Microsoft’s cloud output in China and will undertake a massive increase in capacity.

Starting in 2018, 21Vianet will invest in new infrastructure to triple the capacity of Azure cloud in China. The company operates Microsoft’s platform in the country and deals with the complexity of Chinese law.

Under the laws of the country, foreign cloud providers must partner with a local company to sell services. 21Vianet is Microsoft’s partner and the companies are trying to expand into what is a major cloud frontier.

Cloud business is still relatively small in China, but the marketplace is set to explode. As in most sectors, tapping the Chinese market could mean huge business. Microsoft hopes to be first at the table. Azure currently has 80,000 customers in China, but Microsoft wants to be on the crest of the wave when the boom arrives.

The company already has an advantage over rivals like Amazon Web Services (AWS) and Google Cloud. Azure was the first international cloud service in China and has important customers like Huawei and Lenovo.

Cloud Competition

Expansion and dominance in China could mean riches for any company that wins the market. For Microsoft, it could help the company achieve more parity with market leader Amazon Web Services (AWS).

I have written before about the current cloud service market. Amazon is the clear market leading, Microsoft is clear in second position, and Google is clear in third. While Microsoft and Google are growing, they are growing within an expanded customer base and not taking customers from Amazon.

Canalys and Synergy Research Group both published recent reports that corroborate this assumption. Both reports show that despite significantly growing, Azure has not made a major dent in Amazon’s position.

I could argue it does not really matter as there seems enough cloud business for the three leaders to thrive. Certainly, China could play a significant role in deciding if Microsoft can ever overtake AWS.