Google Abandons Plans To Offer Its Cloud Initiative In China

Alphabet Inc GOOGL GOOG owned Google will not be offering its new cloud service termed “Isolated Region” in China and other sensitive markets.

What Happened

Isolated Region was an initiative that aimed at helping countries keep control of data within their borders and was thought to be a “massive strategy shift,” according to Bloomberg’s sources.

Under the initiative, Google could have set up cloud computing services controlled by a third party —  for example — a government agency or a local company. This would have allowed the search engine giant to separate the set-up from its existing data centers and computer networks.

Bloomberg’s sources revealed that the search engine giant ended the Isolated Region initiative in May due to mounting geopolitical concerns and COVID-19.

Google’s plan was to sell cloud services in what it terms as “sovereignty sensitive markets,” such as China and the European Union.

A Google spokesperson denied that Isolated Region was shuttered due to geopolitical tensions or the pandemic and instead attributed the closure of the project to “other approaches” the company was pursuing that “offered better outcomes.”

The spokesperson said that Google does not offer and “has not offered cloud platform services inside China.” 

Why It Matters

The project was initiated in 2018 and was thought to be aimed at China, where rules require that Western firms join hands with a local Chinese partner company in order to provide data or networking services, according to Bloomberg.
Rivals Amazon Inc AMZN and Microsoft Corporation MSFT sell their cloud services in China, but Google does not. 

Efforts were made by Google to sell these services nearly three years ago, but these were brought to an end by Thomas Kurian after he took over as Google Cloud’s CEO.

Google cloud generated $8.9 billion in revenue in 2019, a rise of 53% compared with the preceding year. 

Price Action

Alphabet class A shares traded 0.16% higher at $1,506 on Wednesday in the after-hours session. The shares had closed the regular session 0.92% higher at $1,503.60.

The company’s Class C shares traded 0.33% higher at $1,501 in the after-hours and closed the regular session 0.73% higher at $1,496.