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Alibaba looks set to shake up the global cloud industry status quo

Alibaba looks set to shake up the global cloud industry status quo

Alibaba Cloud was named among the top five cloud infrastructure services providers in the world at the end of 2017

Jack Ma - Alibaba Group founder and executive chairman (Alizila)

Jack Ma - Alibaba Group founder and executive chairman (Alizila)

While Alibaba Cloud’s breakneck growth over the past year is unlikely to topple the market leader, Amazon Web Services (AWS), any time soon, the Chinese company’s dramatic rise could potentially shake up the current global cloud services market.

Synergy Research Group revealed in February that Alibaba Cloud, also known as Aliyun, had, for the first time, been ranked among the top five cloud infrastructure services providers in the world during the final quarter of 2017, the other market leaders being AWS, Microsoft, IBM and Google.

The industry research and analysis firm, which provides quarterly market tracking and segmentation data on IT and cloud related markets, pointed out that Alibaba’s rise into the top five followed 104 per cent growth in cloud revenue for the company in Q4 2017.

According to financial results announced on 1 February, Alibaba’s revenue from cloud was US$553 million for the fourth quarter of the 2017 calendar year. The increase saw Alibaba gain one per cent in global market share.

In the same period, AWS grew its already dominant global cloud infrastructure services market share by half a per cent, equating to a 44.6 per cent year-on-year revenue increase for the company, delivering over US$5.1 billion in revenue during the three-month period.

According to Technology Business Research (TBR) cloud practice manager, Allan Krans, Alibaba Cloud’s increasingly impressive performance will see the company play a substantial role in the cloud market by 2019 and capture more share over the next two years.

Krans is clear that, despite its rapid growth, there is currently no conceivable scenario in which Alibaba Cloud could overtake AWS as the global leader in cloud by 2019, despite Alibaba Cloud president, Simon Hu, previously declaring the company was “on track” to overtake the market leader by that time.

However, the TBR analyst argues that Alibaba’s investments and expansion over the next two years will certainly benefit all of its peer Chinese cloud vendors, potentially leading to a swathe of Chinese cloud operators making a play for the global market, upturning the largely US-centric cloud market in the process.

“As more widespread acceptance of cloud solutions from Chinese-based firms increases, it will open the door for Alibaba peers such as Baidu and Tencent to more easily win international adoption,” Krans said in a TBR special report.

However, Krans stresses that the Chinese cloud players still have to fight an uphill battle gaining market traction in the West, with much of their substantial growth focused in their home country.

“Neither Alibaba nor Baidu has a big-name US or European customer win to share, which is critical for credibility in the cloud space,” Krans said. “The case-study tactic is particularly important with cloud adoption, as the perceived risks of adoption remain a powerful inhibitor to more widespread adoption.

“Similar to the struggles US vendors faced early in their international expansions, time and persistence will help offset the barriers to Chinese cloud vendors’ global expansion.

“Partnerships, riding the wave of new innovation, and supporting Chinese peers’ expansion overseas are all strategies that will eventually help vendors such as Alibaba and Baidu expand their revenue bases outside China,” he said.

It should be noted, however, that Albaba Cloud, which has nine of its 15 cloud data centres located outside China, has made substantial headway in other regions.

In Australia, for example, which was one of four regions where Alibaba Cloud opened new data centres at the end of 2016 along with Japan, Germany, and the United Arab Emirates, the company has already struck up local partnerships to boost its presence.

When Alibaba Cloud opened its first Australian data centre in Sydney in November 2016, Alibaba Group managing director for A/NZ, Maggie Zhou, said the company’s globalisation strategy in Australia was only possible via localisation.

“Our globalisation strategy is localization,” Zhou said. We recognise that only if we work with local partners here, we will see success.

“This includes the government, includes the channel partners and businesses here. We are also very eager to bring Alibaba cloud here in Australia to enable the young people, the SMBs and the startups,” she said.


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