Google has abandoned plans to offer a major new cloud service in China and other politically sensitive countries due in part to concerns over geopolitical tensions and the pandemic, according to two employees familiar with the matter, revealing the challenges for US tech giants to secure business in those markets. In May, the search giant shut down the initiative, known as ‘Isolated Region’ and which sought to address nations’ desires to control data within their borders, the employees said. The action was considered a ‘massive strategy shift,’ according to one of the employees, who said Isolated Region had involved hundreds of workers scattered around the world.

Alphabet Inc.’s Google is pouring money into cloud computing, part of a broader effort to find new sources of growth beyond search advertising. Google Cloud generated $8.9 billion in revenue in 2019 a 53 per cent increase over the previous year as it has pushed into sectors such as finance and government that require special security clearance and features that shield confidential data. Rivals Microsoft Corp. and Amazon.com Inc. already offer these capabilities via their cloud units.

Google’s recent decision to nix the Isolated Region project was made partly because of global political divisions, which were exacerbated by the Covid-19 pandemic, according to the two employees, who requested anonymity because the project hasn’t previously been made public. The geopolitical issues placed demands on Isolated Region that it couldn’t deliver, according to one of the employees. Documents provided to workers also detailed global tensions and their influence on Isolated Region’s closure, the employee said.

The initiative would have allowed Google to set up cloud services controlled by a third party, such as a locally owned company or a government agency. The result would be a business sequestered from Google’s existing cloud computing services, which include data centres and computer networks.

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