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Big Cloud sees China as a problem and an opportunity

Protocol Enterprise

Hello and welcome to Protocol Enterprise! Today: why AWS and Microsoft are building AI hubs in China while warning about China’s AI plans, Citrix gets a call from private equity and the latest funding rounds for enterprise tech startups.

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While AI text-processing services can occasionally produce some questionable results, more and more professionals are using them at work. According to Coresight Research, 41% of digital marketing executives surveyed in November 2021 are using natural language processing to produce content like business data reports, personalized emails and in-app messages.

Big Cloud’s tricky dance with AI in China

There’s no law against U.S. companies developing AI in China, but the two biggest U.S. cloud companies are expanding their artificial intelligence and cloud-related efforts there despite warnings from their own executives about the AI-related threats posed by China’s government.

AWS is hiring for several AI engineering roles based in China. At the same time, Amazon’s CEO and former AWS chief Andy Jassy recently sat on an influential national commission that argued the U.S. was at risk of losing its technology leadership position to China as AI developments advance there.

  • According to Amazon’s company job postings, AWS is looking for data scientists and other AI and machine-learning specialists in Beijing, Shanghai and Shenzhen.
  • One gig calls on a PhD-level engineer or computer scientist to join the company’s “tip-of-the-arrow tech leaders” to work on “high visible, high impact AI/ML projects for Chinese customers” and interact closely with customers and the academic community there.

Academic AI researchers historically have ignored borders and politics, instead collaborating globally in search of scientific advancement. But geopolitical voices are growing louder in the conversation around AI advancement.

  • China’s national efforts to develop — and in some ways, control — corporate AI and other emerging tech worry people throughout Western governments concerned about China’s use of facial recognition and algorithmic social scoring, flagrant human rights abuses and the increased potential for AI-fueled military dominance.
  • In fact, AI tech leaders – including representatives of AWS, Microsoft and Google – recently played an integral role as members of a U.S. commission that published an influential report in 2021 which cautioned against letting China surpass the U.S. in AI technology development.
  • Still, all the while, in discordance with that message, AWS and Microsoft have eagerly expanded their efforts to supply and harness the raw materials for advanced AI development inside China.

In China, localization is mandatory.

  • Rather than providing services to customers directly, AWS is legally required by China to provide its services through China-based partners.
  • “They all want the money, and they’re not going to not serve the Chinese market, and if they have to build the AI in a separate bubble they will,” said Mark Donatelli, managing partner at marketing data technology consultancy Cimply.
  • AI developed in China is likely to directly or indirectly become part of the overall product strategy for companies, said Tara Murphy Dougherty, CEO of Govini, which provides a machine-learning-based system to help government agencies find and select tech providers.
  • Still, China’s restrictions on AI and other technology could get in the way when it comes to transferring data and tech back to the U.S., said an export controls lawyer who spoke on condition of anonymity.

China’s national efforts to develop AI and other emerging technologies were a serious concern at the National Security Commission on AI, a short-lived federal initiative launched in 2020 to review the state of AI and machine learning in the U.S.

  • “We take seriously China’s ambition to surpass the United States as the world’s AI leader within a decade,” wrote the commission in a lengthy March 2021 report. “If the United States does not act, it will likely lose its leadership position in AI to China in the next decade and become more vulnerable to a spectrum of AI-enabled threats from a host of state and non-state actors,” it cautioned.
  • Google’s Andrew Moore, a member of the commission with Jassy, told Protocol the work of the commission was not intended to deter collaboration between the U.S. and China in AI development.
  • Of the Big Three cloud companies, Microsoft may be the most entrenched in China. The company has fostered and invested in AI research and development there for decades through its Microsoft Research Asia center founded in 1998. More recently in 2018, Microsoft established its government-funded, public-private “AI innovation hub” in Shanghai.
  • “The bottom line is the Chinese government could walk into any of those data centers, and they do, and look at everything,” said Dan Harris, a lawyer with Harris Bricken, which works with companies doing business in China.

China's government has signaled interest in collecting data from private companies, including foreign multinationals.

  • Already, multiple data exchange platforms employed to trade data – including data used to build AI — have been set up throughout the country, some with backing from city or provincial governments and ministries.
  • “I don’t think they’re blind to [the risks]; they don’t want to talk about it,” said Harris of companies developing AI in China. “The thing is, companies generally are concerned with only their bottom line, and that’s what the shareholders are concerned with, so if it’s not illegal, they’re doing it.”

— Kate Kaye (email | twitter)


A MESSAGE FROM DATAIKU

Dataiku is the only AI platform that connects data and doers, enabling anyone to transform data into real business results — from the mundane to the moonshot. Because AI can do so much, but there's no soul in the machine, only in front of it. Without you, it's just data.

Learn more

Private equity comes for SaaS again

SaaS is still a hot target for private equity investment, even if the public markets are cooling on enterprise software. Vista Equity Partners and Evergreen Coast Capital, a division of Elliott Investment Management, announced Monday they are buying Citrix Systems for $16.5 billion in an all-cash deal.

PE firms have shown renewed interest in enterprise SaaS companies over the past two years, after sitting on treasure troves of cash without enough buying targets. Taking public tech companies private and then restructuring them is one way for PE firms to squeeze value out of a slowing market.

The Citrix acquisition is a perfect example: Vista plans to consolidate Citrix with TIBCO, an intelligence software business, to sell a combination of analytics, virtualization and cloud computing tools. Together, the combined company will have 400,000 customers, most of which are in the Fortune 500.

Private equity isn’t done with enterprise SaaS yet, and the tech stock dip might prove the perfect time to strike.


— Aisha Counts (email | twitter)

Upcoming at Protocol

The cloud let chief information officers become more strategic and focused on building business value instead of managing IT as a cost center. Then the pandemic thrust CIOs into an even more central role: They became crucial leaders when managing remote work, navigating abrupt changes in business operations and accelerating digital transformation.

So what’s next for CIOs? Join Protocol’s Tom Krazit for a virtual event on Feb. 8 at 10 a.m. PT in discussion with four amazing IT leaders: Rob Carter, CIO, FedEx; Chris Bedi, CIO, ServiceNow; Sheila Jordan, Chief Digital Technology Officer, Honeywell; and Vittorio Cretella, CIO Procter & Gamble. RSVP here.

Financial corner

O9 raised $295 million for its AI-powered supply chain software, valuing the company at $2.7 billion.

Moglix, a B2B industrial marketplace, was valued at $2.6 billion after raising $250 million in a funding round co-led by Tiger Global.

Firebolt raised $100 million for its cloud data warehouse, valuing the startup at $1.4 billion.

SparkCognition’s cyberattack mitigation tech was valued at $1.4 billion after a $123 million funding round.

CaptivateIQ reached a valuation of $1.25 billion after raising $100 million for its sales commission software.

MinIO raised $103 million for its open-source multicloud storage solution, valuing the company at $1 billion.

Darwinbox, an HR platform, raised $72 million at a valuation north of $1 billion.

InstaDeep closed a $100 million funding round to expand its AI decision-making solution.

Cyara raised $350 million for its customer experience testing platform from K1 Investment Management.

Around the enterprise

Scale AI won a contract to provide testing and machine-learning management services to the Department of Defense that could be worth as much as $249 million.

Docker Desktop users must decide by the end of today if they need to purchase a new subscription license to the software or go in a different direction.

Demand for automotive chips helped NXP Semiconductors beat Wall Street expectations on a 21% jump in revenue.

It’s been nearly three years since HPE bought storied high-performance computing company Cray, and plans for the next generation of the Slingshot interconnect are well underway, according to The Next Platform.

A MESSAGE FROM DATAIKU

Dataiku is the only AI platform that connects data and doers, enabling anyone to transform data into real business results — from the mundane to the moonshot. Because AI can do so much, but there's no soul in the machine, only in front of it. Without you, it's just data.

Learn more

Thanks for reading — see you tomorrow!

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