Chinese banks ditch US providers for Alibaba's Aliyun

Want China Times, Staff Reporter 2014-06-02

Alibaba founder Jack Ma attends a strategy session in Hangzhou,
Zhejiang province, May 27. (Photo/CFP)

Nearly a hundred financial institutions in China have switched to Alibaba's cloud services division Aliyun amid security concerns with American service providers, reports our Chinese-language sister paper Commercial Times.

A "get rid of IOE" wave is currently sweeping across China's financial sector, with IOE being an acronym for traditional American technology and data storage companies IBM, Oracle and EMC.

Recently, a large number of Chinese banks have abandoned IBM's high-end servers, with the trend also expanding to Oracle and EMC as China's state media also accused US networking equipment company Cisco of cyper espionage. Meanwhile, Beijing has also banned the Windows 8 operating system from all government computers.

China's domestic cloud service providers have been the major beneficaries of the movement, with Aliyun gaining several million users as well as nearly a hundred financial institutions that have ditched IOE.

The switch comes after the US Justice Department made the unprecedented move of charging five officers from the People's Liberation Army with cyber espionage earlier this month.

According to the China Securities Journal, Chinese internet giant Alibaba once negotiated with Oracle with plans of a partnership, but Oracle wanted several hundred million yuan for three years of service. Based on its calculations, Alibaba realized it would have to fork out one to 10 billion yuan (US$1.6 billion-US$160 million) in expenses if it continued to use traditional IOE equipment and services, prompting the Hangzhou-based company to start developing its own system.

Apart from Alibaba, Shandong-based technology company Inspur is also reportedly preparing to replace IBM's Chinese servers. Reports say Inspur's host systems are in charge of key applications for institutions such as the Export-Import Bank of China, China Development Bank, China Construction Bank, the Postal Savings Bankof China, and the Bank of Dalian, putting increasing pressure on foreign service providers such as IBM and Oracle.

Once China's financial sector gets rid of IOE, the country's telecoms, energy and other sectors could soon follow suit to create a wave of mass migrations from foreign to domestic service providers, the report said.

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