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Microsoft Heads for Clouds in China

TAIPEI, Taiwan ( TheStreet) -- First the tropical island, now the Azure clouds.

American software giant Microsoft (MSFT - Get Report) is taking another unusual voyage into China as its competitors stick to drier, safer ground.

Starting next week Microsoft will let Chinese consumers sign up for its cloud service, Windows Azure. The system is part of a 200-strong cloud product line already offered to a billion people somewhere in the world.

Microsoft announced the move in late May after agreeing to provide Windows Azure through the Chinese cloud enabler 21Vianet (VNET - Get Report).

"This is the first time that international cloud services will be offered to businesses and consumers in China," 21Vianet President and CFO Shang Hsiao wrote in an email.

Google (GOOG), Amazon.com (AMZN), Dropbox and other potential Windows Azure rivals haven't made it into China despite the obviously large number of potential consumers.

Among the reasons those foes have stayed offshore may be the specter of censorship. Competition from local cloud providers in an immature, uncertain market makes China all the cloudier.

Microsoft is ready for both risks.

Foreign companies bringing any Internet services to China face government-driven censorship pressure that may be unpopular with clients. To make Big Brother's work easy, China generally just pushes local firms to develop Internet services.

But Microsoft had already made friends with authorities in China. In April it revealed plans to set up an "innovation center" on the unlikely Chinese tropical island of Hainan rather than Beijing or Shanghai -- cities that would put it closer to talent, suppliers and customers. That decision drew accolades from Hainan, where officials hope to use Microsoft know-how for local economic development.

One analyst guessed that the Hainan project was Microsoft's way of getting in good with China as a whole. Contrast that with Google, which in 2010 said that due to a hacking attack it would quit censoring searches in China.

Embedding itself further with the Communist leadership, Microsoft decided to spread its cloud over China by working with 21Vianet, the country's largest carrier-neutral Internet data center-services provider.

That partnership assures business for a local firm, which technically could help its government screen Internet content. 21Vianet will "operate and provide" Azure, to quote Microsoft's media statement on the tie-up.
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