Alibaba Vs. Amazon: Cloud Wars
Summary @AlibabaCloud is currently placed fourth in a ranking of cloud providers. Nevertheless, the president of Alibaba Cloud is confident that it would “match or surpass” @Amazon ‘s #AWS by 2019. The booming internet economy and supportive government initiatives are providing the strong tailwinds to accelerate Alibaba Cloud’s ambitions. Up and coming local competitors are potential threats but their company-specific limitations would hamper their efforts to derail the leadership of Alibaba Cloud. While its cloud services business is currently a small fraction of Alibaba’s revenue, one only needs to look at the importance of AWS to Amazon to understand how Alibaba Cloud could become instrumental to the Chinese e-commerce group. With the share price at record high levels, the company would need the contribution from the cloud division to provide the next powerful leg of the top and bottom line growth. Ambitious And Aggressive Alibaba Cloud Gunning Straight For The Top Spot Held By Amazon Web Services A recent report from IT research group Gartner (IT) placed Alibaba’s (BABA) cloud offering in the top four position, holding 2.6% of the global cloud infrastructure services market. That share is a far cry from industry leader @AmazonWebServices (” #AWS “) which cornered almost one-third of the market (30.3%). @Microsoft #Azure ( #MSFT ) held 13.8% while third-placed @Google ‘s 5.9% (GOOG)(GOOGL) was still more than double that of @Alibaba Cloud. Nevertheless, Alibaba Cloud (or Aliyun, as it is better known in China) is still ranked ahead of well-known international names @IBM (IBM) and @Oracle ( #ORCL )(OTC:OCLCF). ￼ Despite the current fourth-placing, Simon Hu, senior vice-president of Alibaba Group and president of Alibaba Cloud, declared to a reporter from the South China Morning Post that Alibaba Cloud was “on track” to surpassing Amazon AWS to become the top provider of cloud services in the world. The statement needed to be taken in the context of his vow made in 2015 when he said that Alibaba Cloud would “match or surpass Amazon in four years in terms of customers, technology and worldwide scale”. Being on track meant that the Alibaba executive is confident that the company would fulfill its goal by 2019. The South China Morning Post, owned by Alibaba, covered the four-day Alibaba Computing Conference in the Chinese city of Hangzhou, the headquarters of Alibaba. Favorable Home-Ground Conditions Provide A Strong Foundation And Springboard For Alibaba Cloud’s International Expansion Thanks to the strong growth in the Chinese domestic market, Alibaba Cloud managed a 126.5% surge in revenue to US$675 million in 2016, from just US$298 million a year earlier. The division achieved the stupendous results on the back of a 40.7% market share, according to Gartner. The Chinese population, inspired by Jack Ma, the exuberant founder of Alibaba, has been seeing an explosion in the internet economy. Besides e-commerce in the form of the Alibaba and Taobao marketplace or its Tmall variant, online sales through massively popular social media influencers have taken a life of its own in China. The phenomenon coined the “fan economy” has helped spurred sales from virtual items to luxury goods like Givenchy bags and inevitably drive the demand for computing, storage, bandwidth and other services provided by the cloud players. Alibaba chief scientist, Jingren Zhou, remarked that “services” have evolved from basic data storage into a “highly centralised information management system” capable of handling myriad functions from staff payroll to security. Besides the demand from the consumer sector, the government’s resolve to utilize Artificial Intelligence (“AI”) to improve efficiency and provide viable solutions to improve the livelihood of its billion-strong population world prove to be a tremendous source of growth for the cloud industry. China’s state council has in July released an AI development roadmap that aims to make the country a global center of AI innovation by 2030. The imperative to do so stemmed from the huge population scattered across the vast country. Taking the example of education. The Education Ministry has always found it challenging to place qualified and competent teachers in schools all over the country, and in particular the remote ones. In addition, the 188 million students are certainly not a homogenous bunch but with a wide spectrum of learning needs and pace. The adoption of AI has been touted as the panacea to bring both efficiency and quality to education. Thus, it is not surprising that China’s Education Ministry has mandated governments at all levels to spend at least 8% of their annual funding on the digitalization of education. In 2016, the country has already spent around RMB300 billion (US$45.5 billion) on digitalization. This effort would consequently contribute to the demand for cloud services.