Google’s exit may pull plug on other tech giants in China
The US-based company’s spat with China raises issues of censorship and cyber-attacks
By AMIT ROY CHOUDHURY 27 January 2010
US secretary of State Hillary Clinton’s strong speech on Internet freedom last Thursday put the spotlight firmly on Google’s spat with China over targeted cyber-attacks and censorship of the Internet.
Ms. Clinton said: ‘Countries or individuals that engage in cyber-attacks should face consequences and international condemnation. . . In an interconnected world, an attack on one nation’s network can be an attack on all.’
‘A new information curtain is descending across much of the world,’ she added, calling growing Internet curbs as the modern equivalent of the Berlin Wall.
Just as everyone was getting back to work in right earnest after the year-end break, Google revealed, on Jan 12, that a ‘highly sophisticated and targeted’ attack against its network occurred in December 2009 and it originated in China. Attempts were made to access Gmail accounts of Chinese human rights activists as well as confidential data on Google servers.
The company’s chief legal officer, David Drummond, wrote in a blogpost that the attacks have forced the company to ‘review the feasibility of our business operations in China’. He added that the company is no longer willing to continue censoring its results on its China search portal Google.cn.
Google wasn’t the only US-based company that was targeted in this attack. While Google claimed that it was one of 20 large companies that were victims, other security researchers, primarily iDefense Labs, claimed as many as 33 companies were targeted in what was a sophisticated attack.
Media reports have quoted Google engineers as saying that they doubted that a non-governmental actor could pull off something this broad and well organised. The Chinese government has denied involvement in the Internet attacks.
The question is why is Google’s fight with the Chinese authorities such a big event that it gets a mention in the US secretary of state’s speech. It’s also threatening to trigger a political spat between the United States and China.
To understand the dynamics, one needs to recognise that the world is on the cusp of an unprecedented change in the way technology is used at play and work.
Ubiquitous connectivity, which has given birth to Web 2.0 and social-networking technologies, is giving a new meaning to the notion of a global village - everyone will be connected to everyone else. Technology companies such as Google are at the vanguard of ushering in this new era.
At the same time, technology is ultimately a means to an end and is of no value unless there is demand for it. Business ultimately drives all technological change.
This is why China is so important. It is well on its way to becoming the largest market for just about anything and more so for technology-related products.
It already has one of the world’s highest number of people who go on the Internet. At the same time, most of the hardware - computers, telephones, routers - on which this brave new era of connectivity is being built is made in China.
And it’s a country which is on the verge of displacing Japan as the world’s second largest economy. Thus no company can afford to ignore China. So the stakes are high on both sides.
It is still not clear if Google would go through with its threat of quitting China if the government there insists that the company follow the Chinese censorship laws. However, if Google does decide to move out, it will have major ramifications not just for Google, but for almost every technology company that has a Chinese presence.
Would the likes of Microsoft, Yahoo!, Apple and others be able to continue to operate in China? Google will take the moral high ground in the US, and world public opinion would likely swing in its favour for having, apparently, stood up to Chinese censorship rules.
From a purely commercial point of view, closing down its Google.cn search engine would hardly make a dent to Google’s bottom line in the short term. However, long-term it could be different. In terms of revenue, Google at present makes only around 1-2 per cent of its global revenues from China.
Unlike its global dominance in the Internet search engine market, Google is a distant second to local Chinese service provider Baidu.com, which controls between 60 and 70 per cent of the Chinese search market. Needless to say, Baidu.com is heavily censored.
However, leaving China would not be as easy as it seems for the California-based company. Google started out as a search engine with a difference - a small outfit set up by some extremely bright individuals. However, today it’s a technology giant whose product portfolio consists of much more than just a search engine product.
For example, its Android operating system for smartphones is finding its way into an increasing number of phones made by major manufacturers such HTC and Motorola. Google has also announced its Nexus One phone which has the catchy tagline ‘Web meets phone’. The Nexus One will take on Apple’s iconic iPhone.
Also, Google, through its Google Apps enterprise suit, has become one of the major global providers of cloud computing services. Cloud computing refers to applications that are available on the Web and can be accessed by companies for a fee. A whole slew of companies use its enterprise suit as their main ERP (enterprise resource planning) system.
If Google pulls out of China, will it also pull out these allied services? Would HTC or Motorola be able to sell Android-installed phones in China if Google closes its support centre in that country? Similarly, how will executives of a major multinational company which uses Google Apps react if told that its executives would not be able to access the suit when in China?
These issues make the situation much more complicated than what it seems at first glance. The Chinese market is just too integrated with the global economy for a simple and clean break in business ties. Media reports suggest that talks between Google and the Chinese authorities are looking into these issues to see if a compromise can be arrived at.
The Google-China row has re-ignited the debate over global censorship and put pressure on governments across the world to take a stand. Human rights groups have come out in full force against not only the censorship of search results but also the alleged cyber-spying against Chinese human rights activists. Increasingly, governments across the world are getting alarmed at these sophisticated cyber-attacks, apparently emanating from China.
It’s hurting China too. It will have adverse effects on its own companies which are looking to expand globally. Increasingly, Chinese companies would be viewed with suspicion in global markets.
Already Chinese telecom equipment supplier Huawei is facing severe restrictions in selling products in India which is now the world’s fastest growing major telecoms market.
Indians fear - justifiably or not - of backdoors and trojans being installed in Huawei gear. Such suspicions will linger as long as there is a general perception that the Chinese government not only indulges in Internet censorship but also actively encourages cyber-attacks against other nations. Great firewalls are no longer a guarantee for security and prosperity.
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Google’s exit may pull plug on other tech giants in China
The US-based company’s spat with China raises issues of censorship and cyber-attacks
By AMIT ROY CHOUDHURY
27 January 2010
US secretary of State Hillary Clinton’s strong speech on Internet freedom last Thursday put the spotlight firmly on Google’s spat with China over targeted cyber-attacks and censorship of the Internet.
Ms. Clinton said: ‘Countries or individuals that engage in cyber-attacks should face consequences and international condemnation. . . In an interconnected world, an attack on one nation’s network can be an attack on all.’
‘A new information curtain is descending across much of the world,’ she added, calling growing Internet curbs as the modern equivalent of the Berlin Wall.
Just as everyone was getting back to work in right earnest after the year-end break, Google revealed, on Jan 12, that a ‘highly sophisticated and targeted’ attack against its network occurred in December 2009 and it originated in China. Attempts were made to access Gmail accounts of Chinese human rights activists as well as confidential data on Google servers.
The company’s chief legal officer, David Drummond, wrote in a blogpost that the attacks have forced the company to ‘review the feasibility of our business operations in China’. He added that the company is no longer willing to continue censoring its results on its China search portal Google.cn.
Google wasn’t the only US-based company that was targeted in this attack. While Google claimed that it was one of 20 large companies that were victims, other security researchers, primarily iDefense Labs, claimed as many as 33 companies were targeted in what was a sophisticated attack.
Media reports have quoted Google engineers as saying that they doubted that a non-governmental actor could pull off something this broad and well organised. The Chinese government has denied involvement in the Internet attacks.
The question is why is Google’s fight with the Chinese authorities such a big event that it gets a mention in the US secretary of state’s speech. It’s also threatening to trigger a political spat between the United States and China.
To understand the dynamics, one needs to recognise that the world is on the cusp of an unprecedented change in the way technology is used at play and work.
Ubiquitous connectivity, which has given birth to Web 2.0 and social-networking technologies, is giving a new meaning to the notion of a global village - everyone will be connected to everyone else. Technology companies such as Google are at the vanguard of ushering in this new era.
At the same time, technology is ultimately a means to an end and is of no value unless there is demand for it. Business ultimately drives all technological change.
This is why China is so important. It is well on its way to becoming the largest market for just about anything and more so for technology-related products.
It already has one of the world’s highest number of people who go on the Internet. At the same time, most of the hardware - computers, telephones, routers - on which this brave new era of connectivity is being built is made in China.
And it’s a country which is on the verge of displacing Japan as the world’s second largest economy. Thus no company can afford to ignore China. So the stakes are high on both sides.
It is still not clear if Google would go through with its threat of quitting China if the government there insists that the company follow the Chinese censorship laws. However, if Google does decide to move out, it will have major ramifications not just for Google, but for almost every technology company that has a Chinese presence.
Would the likes of Microsoft, Yahoo!, Apple and others be able to continue to operate in China? Google will take the moral high ground in the US, and world public opinion would likely swing in its favour for having, apparently, stood up to Chinese censorship rules.
From a purely commercial point of view, closing down its Google.cn search engine would hardly make a dent to Google’s bottom line in the short term. However, long-term it could be different. In terms of revenue, Google at present makes only around 1-2 per cent of its global revenues from China.
Unlike its global dominance in the Internet search engine market, Google is a distant second to local Chinese service provider Baidu.com, which controls between 60 and 70 per cent of the Chinese search market. Needless to say, Baidu.com is heavily censored.
However, leaving China would not be as easy as it seems for the California-based company. Google started out as a search engine with a difference - a small outfit set up by some extremely bright individuals. However, today it’s a technology giant whose product portfolio consists of much more than just a search engine product.
For example, its Android operating system for smartphones is finding its way into an increasing number of phones made by major manufacturers such HTC and Motorola. Google has also announced its Nexus One phone which has the catchy tagline ‘Web meets phone’. The Nexus One will take on Apple’s iconic iPhone.
Also, Google, through its Google Apps enterprise suit, has become one of the major global providers of cloud computing services. Cloud computing refers to applications that are available on the Web and can be accessed by companies for a fee. A whole slew of companies use its enterprise suit as their main ERP (enterprise resource planning) system.
If Google pulls out of China, will it also pull out these allied services? Would HTC or Motorola be able to sell Android-installed phones in China if Google closes its support centre in that country? Similarly, how will executives of a major multinational company which uses Google Apps react if told that its executives would not be able to access the suit when in China?
These issues make the situation much more complicated than what it seems at first glance. The Chinese market is just too integrated with the global economy for a simple and clean break in business ties. Media reports suggest that talks between Google and the Chinese authorities are looking into these issues to see if a compromise can be arrived at.
The Google-China row has re-ignited the debate over global censorship and put pressure on governments across the world to take a stand. Human rights groups have come out in full force against not only the censorship of search results but also the alleged cyber-spying against Chinese human rights activists. Increasingly, governments across the world are getting alarmed at these sophisticated cyber-attacks, apparently emanating from China.
It’s hurting China too. It will have adverse effects on its own companies which are looking to expand globally. Increasingly, Chinese companies would be viewed with suspicion in global markets.
Already Chinese telecom equipment supplier Huawei is facing severe restrictions in selling products in India which is now the world’s fastest growing major telecoms market.
Indians fear - justifiably or not - of backdoors and trojans being installed in Huawei gear. Such suspicions will linger as long as there is a general perception that the Chinese government not only indulges in Internet censorship but also actively encourages cyber-attacks against other nations. Great firewalls are no longer a guarantee for security and prosperity.
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