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Tech

Foreign cloud service providers led by Amazon, MS play big in Korea

Joo-Wan Kim and Hanjong Choi Sep 25, 2020 (Gmt+09:00)

Global cloud service providers such as Amazon Web Services (AWS) are taking a greater share of South Korea’s serverless computing market, where home-grown companies are playing catch-up to meet growing demand.

According to market research firm International Data Corp. (IDC) on Sept. 24, major foreign companies took up 51.4% of the Korean cloud service market in 2019 with their combined revenue in Korea rising 40.4% to 669.2 billion won ($572 million) from the previous year.

Their business growth rate outpaced the growth of the domestic cloud computing market, which rose 25.2% to 1.3 trillion won in 2019 from 973.1 billion won in 2018.

Data showed foreign companies have sliced up the Korean market for years but dominated for the first time in 2019 by seizing more than half of the pie.

“In the Korean market, foreign companies are top players in the three main as-a-service categories: infrastructure, software, and platform,” said an official at a local cloud computing service provider.
Foreign companies are playing big in Korea's cloud computing service market
A cloud service is any service available to users on demand via the Internet from a cloud computing provider’s server as opposed to the company’s own on-premises server. Cloud services are designed to provide easy, scalable access to applications, resources and services, and are fully managed by cloud service providers. Cloud computing is generally used to describe Internet data centers (IDCs).

The providers of data centers in the Asia Pacific region are among the fastest growing in the world. In China, two home-grown data center operators -- 21vianet Group and GDS Holdings -- reported annual revenue growth rates of 25% and 39%, respectively, in the first quarter of 2020.

FOREIGN FIRMS’ CLOUT TO GROW

Analysts expect foreign companies’ Korean market share to grow further with their aggressive expansion of IDCs to support cloud business in Korea .

AWS, the cloud service subsidiary of Amazon.com Inc., recently increased the capacity of its data centers in Seoul as more Korean companies use its services.

Google, which offers the Google Cloud Platform, launched its data center in Seoul in February as it attracts a rising number of mobile game developers, including Netmarble Corp., as its clients.

Microsoft, with its Microsoft Azure cloud computing service, plans to set up its second IDC in the southeastern city of Busan this year. The company already has one IDC in Seoul and another in Busan.

The domestic cloud computing industry is now closely watching moves by China’s tech companies, set to advance into the Korean market.

China’s leading e-commerce company Alibaba Group signed a contract early this month with Megazone Cloud, a Korean cloud managed service provider (MSP), to bring its service, Alibaba Cloud Intelligence Brain, to the Korean market.

In January, Tencent Holdings Ltd. obtained an information security management system certification from the Korea Internet & Security Agency to prepare for the launch of its services in Korea. Korean game companies operating in China mostly use Tencent’s cloud services for distribution of their mobile games.
HOME-GROWN CLOUD FIRMS

Korean companies are also stepping up their efforts to boost their presence in the growing cloud service market.

Naver Corp., the country’s largest Internet portal, plans to build its second data center in the city of Chuncheon, northeast of Seoul, by 2022. The company already has an IDC in Sejong City, the country's administrative capital.

Online messaging app operator Kakao Corp. is building its own IDC on the Hanyang University campus in Ansan, with a view to completing it by the end of 2023.

Samsung SDS, the IT arm of Samsung Group, is jointly developing a cloud-based serverless computing business with NHN Corp. Telecom giant KT Corp unveiled its strategy to strengthen the company's cloud-based digital services in July.

Write to Joo-Wan Kim and Hanjong Choi at kjwan@hankyung.com

Edited by In-Soo Nam

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