Google aborts $300m datacentre plan, but will it be back?

datacentreThe big news from the Orient this week, or at least this small part of it, has been Google’s decision to pull out of plans to build a $300 million datacentre in Hong Kong.

Now the web giant claimed this was due to high costs and the difficulty of getting enough land for its requirements, which at first glance seems fair enough. It ain’t cheap here and land is at a premium in the tiny SAR.

However, the more I think about it the stranger it seems, and here’s why.

  • It’s not short of a bob or two – was cost really the reason for its decision?
  • The project has been trailed way back since 2011 when Google announced it bought 2.7 hectares of land in the Tseung Kwan O Industrial Estate near Sai Kung, although interestingly a link to the Google page on it now results in a 404 error message.
  • At the time, Google said: “We chose Hong Kong following a thorough and rigorous site selection process, taking many technical and other considerations into account, including location, infrastructure, workforce, reasonable business regulations and cost.”

So what’s changed?

Mainland China is admittedly a small market for Google and that probably won’t alter unless there’s an unimaginable change of heart from Beijing. But it knew that back in 2011 when it bought those 2.7 hectares of land that are suddenly deemed not enough.

It’s more likely that with projects underway in Singapore and Taiwan, Google is concentrating on those first to ramp up its datacentre presence in the region.

We must remember it’s still a baby in the IaaS space when compared with the AWS behemoth.

But I personally wouldn’t rule out a return to the HK project for Google in the future as it looks to grow its Google Compute Engine offering in the future. Rival Rackspace has been steadily building out its operations from Hong Kong, for example, recently launching its first public cloud service in Asia from the former colony.

It must be added that Google already has a healthy complement of servers in the SAR and recently announced a tie-up with the local Chinese University of Hong Kong, so rumours of dissatisfaction with and interference by the local government may be wide of the mark.

However, news of the pull-out will still be a big blow to the Government CIO’s Office as it tries to sell HK over its near neighbours as Asia’s premier datacentre destination.

Recent efforts have included promoting the use of converted factories by waiving various fees and even looking into the possibility of underground facilities built in caves.

If any more PR blows like the Google story start landing next year, it might be time for the HK government to rethink its strategy.


Google: ‘Start-ups can save the world’

eric schmidt“Entrepreneurship is the solution to all the world’s problems,” according to Google executive chairman Eric Schmidt, who was in Hong Kong today to launch a new program to foster greater start-up talent within the Chinese SAR.

Schmidt’s visit was something of an anti-climax in the end. Media were not invited to ask any questions and what we finally got from the Google man after a half hour delay was less than insightful.

He trotted out the usual argument that more innovation and technical invention will likely gravitate to this part of the world because there is a “numerical advantage” in terms of graduates with degrees in STEM subjects.

Several times he also repeated the notion that “the native underlying Chinese culture is entrepreneurial”.

“We all know this, it’s been true for 1000 years. It’s a great asset of Chinese history,” he said.

The inference here is that the region and its people should be more inclined than most to producing innovative technology start-ups.

However, we heard very little about why that’s simply not happened thus far, in Hong Kong at least, although Schmidt did acknowledge that there wasn’t enough of a VC industry here and that, although entrepreneurial, the locals are also culturally afraid of being “different”.

Google’s announcement today – a program of mentorship and incubation with the Chinese University of Hong Kong – is surely yet another indication that the SAR government has singularly failed to foster the kind of innovation that can start local and grow internationally.

It’s a view I’ve heard time and again – even from successful international technology companies who came to Hong Kong with an impression of a hi-tech city and found instead something much less mature to work with.

The conversations at most local tech conferences I’ve been to are still at a “what is the cloud?” stage. It’s difficult to believe sometimes.

When asked whether Google was thinking of founding a formal incubator project even Schmidt had to admit: “You don’t have a big enough software industry. Your lack of software … will hurt you in terms of your global ambitions.”

The one year project announced today is unlikely to change that much.

We don’t know exactly how much access to Silicon Valley “mentors” and help with start-up costs local entrepreneurs will get as part of the initiative, but at first glance it seems like a pretty good way for Google to cream off some of the best of that limited Hong Kong talent.