SAP Venture Opens Shanghai Center for China Cloud Push

SAP SE said its joint venture with China Telecom Corp. opened a data center in Shanghai to aid its push for cloud-computing sales amid rising government concern about information security.

The venture, China Datacom Corp., will use the center initially to support sales of cloud-based human resources solutions, Mark Gibbs, president for the greater China region at SAP, said in an interview in Beijing today. In the next few months, sales of software for supplier and customer management, procurement and electronic commerce will be added, he said.

Collaborating with a large local partner like China Telecom is a way for Walldorf, Germany-based SAP to build trust at a time when security is a “real concern,” Gibbs said. Apple Inc. (AAPL) this month said it’s shifting Chinese users’ data to servers run by China Telecom amid concern by government officials that the information could be a security vulnerability.

“What we’ve done is double down on articulating to customers our deep focus on security,” Gibbs said. “SAP has an advantage in this area, given the path we’ve chosen. We are very open about collaborating with a large Chinese organization that is well trusted.”

Tensions over cyber security between China and foreign technology companies have been rising since the U.S. indictment of five Chinese military officers for allegedly hacking into the computers of American companies in May. China’s state media have targeted U.S. technology companies from Apple to Microsoft Corp. and Google Inc. with claims the companies cooperated in a secret U.S. program to monitor China.

Top Concern

Security is the biggest concern for Chinese software customers right now after functionality, Gibbs said.

SAP, the biggest maker of business-management software, established the venture in November with a China Telecom subsidiary called China Communications Services, Gibbs said.

The venture had already been providing human resources support through the cloud for 15,000 of the carrier’s own users, he said in April.

SAP’s business in China, which the company considers its “second home,” saw double-digit software and software-related services growth in the second quarter, Chief Executive Officer Bill McDermott told investors on a conference call last month.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at +86-10-6649-7507 or elococo@bloomberg.net To contact the editors responsible for this story: Robert Fenner at +61-3-9228-8705 or rfenner@bloomberg.net Suresh Seshadri, Subramaniam Sharma

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