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ZTE aims to expand cloud computing services overseas

By Lee Chyen Yee

SINGAPORE (Reuters) - China's ZTE Corp, the world's fifth largest telecoms equipment maker, plans to expand cloud computing services abroad, despite the challenge of allaying security concerns.

"Nowadays, data privacy has become a hot topic. But we understand that every customer has its own requirements and characteristics and we are always monitoring developments in the industry," Zhu Jinyun, ZTE's general manager for cloud computing and IT products operations, told Reuters in a telephone interview from the Chinese city of Nanjing, where ZTE has a global cloud computing center.

ZTE, the second-biggest telecoms equipment company in China behind Huawei Technologies Co Ltd, already provides cloud services to China's telecom carriers, such as China Telecom, major internet firms and oil and energy companies.

And Zhu said he was targeting a 10 percent contribution from the cloud and enterprise business to ZTE's overall revenues in 2013, up from around 7 to 8 percent last year.

He declined to break down the revenue figure for cloud computing, which enables organizations to remotely store, manage and process data and applications.

The Shenzhen-based company, which has been profitable in the first half of the year after posting its first-ever loss for the whole 2012, took in revenues of 37.6 billion yuan ($6 billion) in the January-June period, down 11.9 percent from last year.

As it plans to expand into other markets, analysts have warned of security challenges following revelations by former National Security Agency contractor Edward Snowden about U.S. government surveillance.

To allay any concerns that customers have on security issues, ZTE said it has relevant third party certifications, is willing to provide source codes if necessary and has not encountered any security breaches so far.

"We have been in overseas markets for about 20 years and if there is a problem, we would have been discovered," Zhu said.

The global market for public and virtual private cloud services will grow from $30.3 billion in 2011 to more than $241 billion in 2020, with major players including Amazon.com Inc, Google Inc and Salesforce.com Inc, according to IT research firm Forrester.

In the Asia-Pacific region Japan is the largest market for cloud computing and will remain so through 2020, while China is growing rapidly, Forrester said.

However, analysts said some Western markets remained suspicious of Chinese companies. For instance, ZTE and Huawei are not allowed to provide telecoms equipment to U.S. carriers due to security concerns.

"For offering services internationally, I think there will naturally be a degree of concern about data security," said Chris Morris, an Australia-based cloud computing industry analyst with IDC, adding that Chinese companies might not be able to meet a number of legislative requirements in some major markets.

(Editing by Jeremy Laurence and Greg Mahlich)

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