{"id":3750,"date":"2017-02-27T20:27:37","date_gmt":"2017-02-27T20:27:37","guid":{"rendered":"https:\/\/www.rsoftsolution.com\/blog\/ambitious-alibaba-takes-aim-at-the-kings-of-cloud-computing.html"},"modified":"2017-02-27T20:27:37","modified_gmt":"2017-02-27T20:27:37","slug":"ambitious-alibaba-takes-aim-at-the-kings-of-cloud-computing","status":"publish","type":"post","link":"https:\/\/www.rbsitsoftwaresolution.in\/blog\/ambitious-alibaba-takes-aim-at-the-kings-of-cloud-computing.html","title":{"rendered":"Ambitious Alibaba takes aim at the kings of cloud computing"},"content":{"rendered":"


\n<\/p>\n

When you think of the biggest cloud players in the world, one company you might not consider is Alibaba<\/a>, the Chinese e-commerce giant that held a record $25 billion U.S. IPO in 2014<\/a>.<\/p>\n

Alibaba\u00a0entered the cloud computing business in 2009<\/a>, just three years after Amazon launched its cloud division, AWS \u2014 and Alibaba\u2019s cloud computing efforts are among the ambitious projects that the Chinese e-commerce giant is pursuing aggressively.<\/p>\n

It\u2019s impossible not to note the similarities between the two companies. While Alibaba is the premier e-commerce company in China, Amazon is the biggest in the U.S.<\/p>\n

The utter dominance of both is proven on paper: NASDAQ-listed Amazon\u2019s market cap exceeds $400 billion, while Alibaba\u00a0is valued at $250 billion according to its NYSE share price. When it comes to the cloud, the nature of their core\u00a0businesses and the size of their computing requirements both necessitate\u00a0computing on a massive scale. Both believe they can parlay that knowledge and experience into a significant business offering cloud services to others.<\/p>\n

Two years ago, Alibaba decided to take the cloud part of its business more seriously and expand outside of China with a billion dollar investment in Aliyun<\/a>\u00a0(now known as Alibaba Cloud in English). At the time, Aliyun\u2019s president Simon Yu\u00a0made a bold prediction<\/a>, telling Reuters, \u201cOur goal is to overtake Amazon in four years, whether that\u2019s in customers, technology, or worldwide scale.\u201d<\/p>\n

We\u2019re at the halfway mark\u00a0now and while that goal seems unlikely at this point, Alibaba has begun to make its\u00a0presence felt, particularly\u00a0in China and the rest of Asia. In fact, there\u2019s plenty of evidence that Alibaba Cloud can play an important part for Alibaba\u2019s overall business.<\/p>\n

Battling giants<\/b><\/p>\n

Up until its financial commitment in Aliyun in 2015, Alibaba was content to use the\u00a0scale of its e-commerce services \u2014 which range from a marketplace and branded mall, to payment services and digital banking and count nearly 500 million users \u2014 to bring in customers for its cloud business in China. Moving out to the rest of the world has far greater\u00a0challenges.<\/p>\n

Still, Alibaba\u2019s cloud unit has been growing at a brisk pace with triple digit year-over-year growth for its last seven\u00a0quarters including 115 percent in its most recent report in December<\/a>. Based on that growth, Alibaba Cloud\u00a0is probably one or two quarters from reaching break even or profit, but already it has surpassed the $1 billion run rate mark courtesy of $254 million in revenue in its most recent quarter.\u00a0Not bad, but not close to AWS, which grew at a more modest 47 percent rate<\/a> for a total income of $3.53 billion for the quarter or a run rate over $14 billion.<\/p>\n

\"Giant<\/p>\n

Photo: Qilai Shen\/Bloomberg via Getty Images<\/p>\n

That\u2019s a stark difference and it shows just how far Alibaba has to go in the cloud business to catch AWS.<\/p>\n

However, Alibaba might be doing better than you think. According to Synergy Research Group<\/a>, Alibaba is sixth in the world behind AWS, Microsoft, Google, IBM and Salesforce in infrastructure, platform and hosted private cloud services (this number does not include Salesforce\u2019s more substantial SaaS business).<\/p>\n

\u201cFor cloud infrastructure services (IaaS, PaaS, Hosted Private Cloud services) Alibaba is now ranked sixth, based on worldwide revenues in Q4. For China specifically, while AWS and Microsoft are in the top five ranking in China, the market is led by Alibaba (a long way out in front) followed by China Telecom. Alibaba market share is running at 40 percent [in China] and has been increasing with time,\u201d John Dinsdale, Synergy\u2019s\u00a0chief analyst and research director, told TechCrunch.<\/p>\n

Alibaba itself says the cloud unit\u00a0counts 765,000 paying customers as of the last quarter. That figure represented an increase of about 114,000 on the previous\u00a0quarter, although there was no equivalent number given out for the\u00a0previous year.<\/p>\n

Moving beyond\u00a0China<\/b><\/p>\n

While several different analysts agree with Synergy\u2019s assessment of Alibaba as the clear number one cloud vendor in China, Alibaba\u2019s Ethan Yu\u00a0concedes\u00a0that the market is still a few years behind the U.S., and there is plenty of room for growth \u2014 keeping in mind that China itself represents a massive potential market.<\/p>\n

\u201cThe addressable market is getting bigger in China with only single digit IT spending in the cloud and the rest in on-prem software and hardware spending. There is still enough buy out there to move up to the cloud\u201d, Yu said. He saw 2015 year as the year it all changed (the same year Aliyun invested a $1 billion in its cloud operation).<\/p>\n

\"alibaba-cloud-in-hong-kong\"<\/p>\n

Photo: Alibaba<\/p>\n

\u201cI think in 2015, adopting infrastructure in the cloud, there was suddenly a change, a tipping point where most [Chinese] CIOs found it quite acceptable to use the cloud in some ways\u201d, he said. But even as the market shifts in China, the company has made it clear that its ambitions stretch far beyond its home country.<\/p>\n

\u201cChina is a big market, but the cloud market just started to grow, which gave us a good foundation. We think we can do more outside of China, but we are a few years behind. We started our global footprint a couple of years ago. We have 14 global data centers including 8 outside of China\u201d, he explained.<\/p>\n

US market challenges<\/h2>\n

Like AWS, Alibaba Cloud began with smaller customers, but as it sets its sights higher in the market, it wants to lure enterprise customers to the platform. \u00a0The company says that it has proven it can handle the workload from larger customers based on its abilities to handle its own massive e-commerce and financial services businesses.<\/p>\n

Of course, landing enterprise customers in the U.S., where the new president has sent\u00a0signals of tougher trade relations with China, may prove difficult. Yu said he needs to see how trade talk plays out, but he added, \u201cFor now, we don\u2019t have any comments on that.. but our position is very firm. A friendly commercial relationship will help both parties.\u201d<\/p>\n

\"Alibaba<\/p>\n

Alibaba might actually find itself better positioned than others in the current climate in the U.S. Executive chairman Jack Ma held a meeting with the (then) president-elect\u00a0in early January which culminated in a promise\u00a0that Alibaba would create one million new jobs in the U.S.<\/a><\/p>\n

Neither man provided details on how they would achieve that, and\u00a0the promise looks like little more than grandstanding by Ma \u2014 or an effort to curry favor with the new administration. Either way, Alibaba will get its first real signal soon enough. Ant Financial, an Alibaba-affiliated\u00a0fintech\u00a0firm and another ambitious project, is acquiring U.S.-based Moneygram in an $880 million deal<\/a> that is pegged to close in the second half of this year, assuming that regulators and the government OK\u00a0it.<\/p>\n

Alibaba\u2019s other bets<\/h2>\n

The cloud unit\u00a0and Ant Financial, which is close to raising $3 billion in debt funding for MA deals<\/a>, are two areas Ma and Alibaba look to for the future. Meanwhile, Alibaba\u2019s core e-commerce business is performing above expectations \u2014 it smashed analyst forecasts for its final quarter of 2016<\/a> and raised its expectations for the remainder of the financial year \u2014 but the e-commerce giant wants to develop businesses that can reduce its reliance on its core services in China.<\/p>\n

Those services accounted for 87 percent of the\u00a0RMB 53.25 million ($7.67 billion) revenue grossed in the last quarter.<\/p>\n

\"HANGZHOU,<\/p>\n

Photo: VCG\/Getty Images<\/p>\n

\u00a0<\/p>\n

Alibaba Cloud\u00a0contributed just $215 million to that figure \u2014 with a small\u00a0$49 million loss \u2014 but revenue was up 50 percent on the previous quarter alone and 115 percent on the previous year.<\/p>\n

Although these growth figures are impressive, it would take years to reach $1 billion per quarter so Alibaba has focused on expanding its geographic footprint, pushing its cloud business into Europe, Australia, Japan and the Middle East by\u00a0opening of four new data centers last November.<\/a>\u00a0The company has also expanded existing sites,\u00a0recently doubling its capacity<\/a>\u00a0in Hong Kong to \u201caddress increasing demand.\u201d<\/p>\n

Alibaba isn\u2019t just relying on the cloud to generate new revenue, it is investing in what it knows: e-commerce. The company picked up a stake in Paytm<\/a>, India\u2019s top mobile wallet firm, and an online sales firm, and elsewhere in India, it was linked with a deal for Amazon rival Snapdeal. There have been many rumors but no investment<\/a> \u2014 nonetheless, Jack Ma has spoken publicly of his desire to expand into India<\/a>, and it wouldn\u2019t be a shock if he oversaw\u00a0another deal to ensure that the plan isn\u2019t entirely reliant on Paytm.<\/p>\n

Elsewhere, last year Alibaba snapped up a controlling share in Lazada<\/a>, the largest online shopping site in Southeast Asia, a region of more than 600 million consumers and increasing internet connectivity.\u00a0While a 2016 report co-authored by Google<\/a> suggested that online commerce in Southeast Asia will rise to reach $88 billion by 2025, the region is another slow burner for Alibaba. Online\u00a0is thought to account for under five percent of commerce in the region, while Lazada has\u00a0yet to break even, let alone post a profit.<\/p>\n

That really sums up many of Alibaba\u2019s bets. It is still early days and the reliance remains on Taobao (its marketplace) and T-Mall (its service for brands) in China, but there\u2019s enough money in the bank to push its business interests in India, Southeast Asia and the cloud towards a higher chunk of revenue. And Ant Financial is also helping grow its e-commerce footprint abroad with investments in the U.S., Korea, Southeast Asia and beyond. In that respect, the cloud may be Alibaba\u2019s longest shot \u2014 or its grandest ambition.<\/p>\n

While it\u2019s not impossible for a company with the resources and reach of Alibaba to make a spirited play for cloud market share outside of Asia, it would take some unlikely shifts in the current balance of power in the market\u00a0for it to reach Simon Yu\u2019s ambitious goal of catching AWS.<\/p>\n

<\/p>\n

Featured Image: VCG\/Getty Images<\/small><\/p>\n

Article source: http:\/\/feedproxy.google.com\/~r\/techcrunchIt\/~3\/bw5wA9siHIA\/<\/p>","protected":false},"excerpt":{"rendered":"

When you think of the biggest cloud players in the world, one company you might not consider is Alibaba, the Chinese e-commerce giant that held a record $25 billion U.S. <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[19],"tags":[25],"class_list":["post-3750","post","type-post","status-publish","format-standard","hentry","category-enterprise-software","tag-enterprise"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t