IBM partners with Dalian Wanda to bring Watson and cloud services to China

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IBM Corp. is teaming up with Chinese conglomerate Dalian Wanda Group Co. Ltd. to take another crack the Middle Kingdom’s cloud computing market.

The two companies plan to form a joint entity called the Wanda Cloud Co. that will begin offering services from 2018, IBM said at its InterConnect conference Monday. Dalian Wanda is an enormous entity that spun out several of its financial businesses last October to form the Wanda Internet Technology Group. That new company runs various data centers within China, offers payment services among other things, and has a stated goal of becoming a major player in the Internet of Things.

Dalian Wanda’s multibillionaire founder Wang Jianlin may be a familiar name. He’s known for being one of the richest men in China, and famously tried to construct what would have been the tallest hotel in London before pulling out of that deal. He’s also known for taking a 20 percent stake in the Spanish soccer team Atletico Madrid.

The partnership announced today will basically see Wanda Cloud license technologies from IBM that will be offered from its own Chinese data centers. The idea is that Wanda will sell IBM Cloud services powered by its Watson and blockchain technologies to Chinese companies, while ensuring compliance with local regulations, Sid Nag, research director at Gartner Inc., told SiliconANGLE.

“[The deal] will help IBM bypass regulatory challenges or privacy objections to enter China’s cloud market,” Nag said.

IBM said the companies will share the revenues from the new business, though neither company disclosed how big a deal this is.

The deal is IBM’s second major foray into China. Two years ago Big Blue said it was teaming up with 21Vianet Group, a carrier-neutral Internet services provider, to bring its cloud services to China. That arrangement will not be affected by today’s news, IBM said.

For Western technology companies looking to enter China’s cloud computing market, it’s becoming increasingly important to have a local partner, as tight rules and regulations make it almost impossible to go it alone. That explains why SAP SE recently entered into an agreement with Lenovo Group Ltd. to offer its cloud services in the country, and why Docker Inc. recently teamed up with Alibaba Group Holding Ltd.’s Alibaba Cloud unit.

“Partnerships are currently a requirement if you want to do meaningful IT business with Chinese companies in China,” said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. “This began about five years ago as the government mandated Chinese hardware and Chinese software be used in any federally funded projects. The IBM and Wanda relationship reflects this trend and IBM’s desire to at least get part of the revenue even if it’s shared, as the alternative is close to zero.”

While this policy might be irritating for Western firms, it’s also one that benefits China as it allows the country to protect its own growing cloud industry, led by companies such as Alibaba, Baidu Inc. and Tencent Holdings Ltd. Those companies, along with emerging players like Wanda, are all considered essential to supporting China’s “Internet+” strategy that envisages leveraging technologies like automation and digitization to revamp its economy.

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