Beschaffung von Microsoft Online Services in China

The People's Republic of China is commonly regarded (along with special cases like North Korea) as the most digitally regulated country in the world. The Great Firewall of China and laws such as the Personal Information Protection Law (PIPL) enable China to shape its internal software market. This is especially true for the provision of cloud services. We explain what sourcing such services looks like in the Microsoft environment in China in this blog post.

The basis of cloud regulation in the People's Republic of China is the so-called "2015 Telecoms Catalogue", which does not explicitly define "cloud computing" and "cloud service", but speaks of "Internet Resource Coordination Services" (ICRS), which, according to the Ministry of Industry and Information Technology, includes "cloud services" (IaaS, PaaS and SaaS).

Internet Resource Coordination Services, which are considered to be a cloud service, fall into the category of "Internet Data Centre Services". In the People's Republic of China, a "Value-Added Telecoms Services" (VATS) license is required to operate an Internet Data Centre. Only Chinese companies can obtain this license, which is why Microsoft Cloud Services can only be purchased in the People's Republic of China via the local provider 21Vianet.

The company is China's largest service provider for Internet Data Centers and offers hosting, managed network services and cloud computing infrastructure. 21Vianet licenses Microsoft technologies and operates local Office365 data centers in China. This means that data in O365 is stored in accordance with legal requirements within China. 21Vianet offers the online services on a subscription basis, provides 1st and 2nd level support and invoices the services to the customer directly or via the Licensing Solution Provider (indirect sales channel). In the direct channel, Microsoft takes the lead in the sales process and contract negotiations. However, the contract itself is then concluded between the customer and 21Vianet. Microsoft also provides 3rd level support directly in China.

The online services offered are based on the globally available services, but some of them are not (yet) offered or are only offered with restrictions. A current overview of the available services can be found on the following Microsoft website. In particular, higher-value security and compliance features, but also MS Teams and Audio Conferencing are not yet offered. The same applies to the Microsoft365 bundle, so that licenses for the Windows operating system still have to be purchased separately. A precise comparison of the required services with the available and offered services is essential.

In order to use online services, an Online Service Premium Agreement (OSPA) must be concluded with 21Vianet or via a Licensing Solution Provider. The contract structure is very similar to the well-known Microsoft contracts and includes the Online Service Terms, Data Protection Addendum, Service Level Agreement and Signature Sheets.

Before signing, the contract documents should be carefully checked, especially with regard to terms of use and their updating, liability clauses, service levels, and data protection regulations. Our experience has shown that negotiations with Microsoft and 21Vianet are generally very tough, but with the appropriate perseverance and emphasis, one or two concessions can be achieved.

Are you also faced with the task of having to negotiate a local contract with 21Vianet in China? Then please feel free to contact us!

Authors: Tobias Philipsen & Felix Baran