Doosan-AWS partnership undermines local cloud industry

By Baek Byung-yeul

Concerns are growing after Doosan Group decided to transfer its data storage and protection systems to Amazon Web Services (AWS), joining more business groups that are abandoning local cloud service providers, IT industry officials said Thursday.

They said Korea may eventually lose its “data sovereignty” as a growing number of companies here become dependent on AWS, Microsoft, Google and other foreign data and IT service providers.

The country's 15th largest conglomerate said its affiliates including Doosan Heavy Industries, Doosan Infracore and Doosan Engineering & Construction will adopt AWS's public cloud computing system by 2022.

“We decided to use AWS cloud computing services as part of the company's digital transformation effort,” a group official said. AWS Korea refused to comment on the contract with Doosan Group, saying, “We cannot confirm this as it is related to a customer company.”

Many firms here are rushing to adopt cloud computing systems because they can save costs and, more importantly, they can also improve productivity by launching enhanced services or analyzing big data based on the latest technologies.

However, local cloud computing service providers are expressing concerns over the increasing adoption of overseas cloud services by large-sized companies because this will hamper the development of the local industry.

“Korea's cloud computing industry is in its early stages and there is high expectation that the market will expand as more companies accelerate their digital transformation. However, firms are increasingly turning to overseas cloud computing service providers as seen by Doosan's move, and this will not help local players,” an official at one major cloud computing service provider here said.

“It is obvious that there is no suitable replacement for foreign cloud computing services because they are capable of managing huge amounts of data for these conglomerates. Also companies using AWS, Microsoft or Google services can improve their productivity as they can efficiently manage their big data in the cloud computing system,” the official added.

According to data by market researcher Gartner, Korea's cloud computing market was estimated at 1.9 trillion won ($1.6 billion) in 2018 and 2.3 trillion won in 2019. With an average growth rate of 19 percent, the market is expected to grow to 3.7 trillion won by 2022.

However, the market is heavily dominated by foreign providers whose combined market share is around 80 percent, while local players such as KT, Naver Business Platform (NBP), NHN, Samsung SDS and LG CNS take up the rest.

Among those top players, AWS has dominated the market here with about a 40 percent share. Though its Korean unit didn't reveal the exact figure, industry officials presume AWS posted about 800 billion won ($674 million) in sales in 2018.

Park Won-ki, CEO of NBP, Naver's cloud computing services provider, also criticized local companies here for choosing overseas cloud services saying local players “have competitiveness in handling sensitive information that requires access in terms of data sovereignty.”

Doosan's ambitious move toward a digital transformation is being led by President and Chief Digital Officer Hyung Won-jun, who joined Doosan in 2018 after working for various multinational companies such as Samsung Electronics and SAP.

But another industry official in the cloud business said Hyung's decision to use the AWS cloud system was quite disappointing as he was expected to take an approach that could have boosted the local cloud computing industry.

“Considering the span of his career, industry insiders expected Hyung would bring a different vision of what the local cloud computing industry should be. But he decided to use AWS instead of a local cloud computing service, which seems to be contrary to others' expectations,” the official said.