Google Scrapped Cloud Initiative in China, Other 'Sensitive Markets'

The project, dubbed 'Isolated Region' was reportedly scrapped in part over geopolitical tensions.
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Alphabet's  (GOOGL) - Get Report Google recently canceled plans for a major new cloud service in China and other markets deemed "sensitive" over geopolitical tensions and COVID-19 concerns, Bloomberg reported. 

The tech giant shut down the project, which was dubbed "Isolated Region," in May. The cloud initiative was aimed at allowing countries to control data within their borders, involved hundreds of workers across the world, and was reflective of a "massive strategy shift" for Google, according to an employee quoted by Bloomberg. 

The plan was to sell cloud services in what Google calls “sovereignty sensitive markets,” such as China and the E.U., where there are robust laws for companies that collect or process people’s data. The project would have allowed Google to set up cloud computing services controlled by a third party, such as a company or government agency, with data sequestered from Google's other cloud services. 

According to documents cited by Bloomberg, geopolitical tensions, in particular between U.S. and China, led to a delay in the project and factored into the company's eventual decision to scrap it entirely. Google is reportedly weighing a scaled-back cloud offering for China. 

"Other approaches we were actively pursuing offered better outcomes,” a Google spokesperson told Bloomberg, although she did not detail those approaches.. “We have a comprehensive approach to addressing these requirements that covers the governance of data, operational practices and survivability of software." 

Alphabet has placed more focus in recent quarters on Google Cloud, in an ongoing effort to broaden its revenue streams beyond advertising. Google Cloud generated $8.9 billion in revenue in 2019, a 53% increase over the previous year.

Shares of Alphabet are up 10% year to date.