Alibaba Cloud: The Sleeping Giant

Trent Warren
Read Time: 4 minutes

Alibaba is the sleeping giant in cloud computing. It’s time to take Alibaba seriously as a world-renowned cloud provider.

Once strictly a Chinese e-commerce business, Alibaba has become a lucrative conglomerate worth approximately $542 billion US dollars due to its vertical and horizontal integration business strategies.

One of these business strategies is Alibaba’s cloud computing technology, which has helped accelerate the overall growth of the company as a whole.

Alibaba Cloud and its Revenue Momentum

Alibaba is on a blistering pace in revenue growth from its cloud computing business.

Alibaba Cloud’s revenue increased 93 percent year-over-year to $710 million after its first fiscal quarter ended June 30, 2018.

Over the last four quarters, Alibaba Cloud has grown its revenue year-over-year by $447 million, $553 million, $699 million and $710 million US dollars, respectively.

Not surprisingly, Alibaba’s rapid growth stems from the Asia-Pacific region where the company originates, with over 98% of Alibaba Cloud’s total revenue sourced from the region.

Alibaba Cloud’s annual revenue run rate is listed as $2.8 billion.

However, Alibaba has a lot of ground to make up if it wants to catch AWS, the worldwide leading cloud provider. AWS lists $20.4 billion for its annual revenue run rate.

Competing for Global Market Share

According to Synergy Research Group, Alibaba Cloud passed IBM in cloud market share and is now the fourth largest cloud provider in the world behind Amazon, Microsoft, and Google as of June 2018. The company’s gain in cloud market share is largely due in part of Alibaba’s dominance in the Asia-Pacific region.

Alibaba Cloud owns 21.2% of the Asia-Pacific region’s market share, a region with 4.3 billion people – more than half of the world’s population. Compare this to AWS, who has a 24.5 % market share in the same region.

If Alibaba wants to take over AWS as the No. 1 cloud provider, then it will either need to grow its global market share outside of this region or look to unseat AWS in major accounts on its home turfAlibaba is already making moves to expand outside of its Asia Pacific domain.

Expansion into The European Cloud Market

Alibaba continues to grow its way into other markets starting with Europe. For example, the Chinese cloud company recently added a staff of 60 in London with the goal to “connect more businesses and brands in Europe with consumers in China and use its logistics network to get products from the U.K. to China,” according to David Lloyd, managing director of Alibaba in the U.K.

Additionally, Alibaba has partnered with European brands such as Sweden’s H&M and Italy’s Marni, selling their products via Alibaba Cloud to Chinese consumers.

“In Asia, we have 552 million active consumers, and that grew by 37 million last year,” said Lloyd. “It’s honestly quite hard to even find 37 million consumers in the U.K.”

That’s why Alibaba’s European division isn’t necessarily just targeting European consumers. They’re targeting Chinese tourists.  Alibaba plans on getting more of its services over in Europe including its mobile pay app, Alipay, and its travel and hotel booking app, Fliggy.

Both apps have plenty of users. Alipay boasts 520 million active subscribers while Fliggy is estimated to have around 200 million. Alibaba’s goal is for Europe to realize the significance of adapting to its services and reaching its consumers via a global brand presence they’re used to.

Alibaba’s European business strategy is simple: as more Chinese tourists visit Europe, more European businesses will grow economically due to the influx of Chinese consumers, with Alibaba providing the infrastructure and services to link these two together.

North American Business Opportunities

Despite dominating market share in the Asia-Pacific and advancements in Europe, Alibaba Cloud only owns 0.1% of market share in North America. If Alibaba wants to become the leader in cloud computing technology, it’s going to need to gain more market share in this region.

While Alibaba’s chances at obtaining US government contracts are farfetched due to tight security requirements and US export laws, Alibaba Cloud will have to secure North American contracts in the private industry, especially focused on Canada and Mexico, where Chinese industry has grown significantly due to the influence of the NAFTA agreement.

Alibaba Cloud has already gained ground with US businesses such as digital marketing company Conversant and mapping software provider Esri.

For example, Esri, a global market leader in geographic information system (GIS) software, provides in-depth mapping and spatial analytics technology.

Powered by Alibaba Cloud technology (IaaS), Esri and Alibaba were able to create a ‘one-stop’ shared geographic information library for the Ningxia Bureau of Land and Resources to employ a geographic information platform for government and civilian use.

As a result, the platform successfully delivered “real-time analytical and visualization tools for both two-dimensional maps and three-dimensional scenes” all within 10 months. It’s been reported that “the number of visitor frequency has increased, and more than 30 Chinese government agencies have used the shared library as customers.”

Esri’s system is now used by all bureaus and agencies in the Ningxia region and provides data for the national government.

With its two North American international headquarters in San Mateo, California, and Ashburn, Virginia, Alibaba Cloud looks to continue to build relationships with US companies.

Conclusion

Alibaba Cloud’s Chief Solutions Architect Derek Wang states that the “Asia Pacific is a unique market, and as a global cloud service provider with an Asia origin, we are committed to leverage our knowledge and experience to build a sustainable regional ecosystem and enrich our offerings to meet the needs of customers in the digital age.”

While Alibaba Cloud is a dominant player in the Asia-Pacific region, in order for it to become a true leader in global in cloud technology, it’s going to need to expand its market share globally.

Alibaba is waking up and addressing this need through its recent business strategy to expand into the European and North American markets via tightly coupled consumer and business services.

Nevertheless, Alibaba Cloud is making the right moves to grow its market share and prove services valuable to business segments looking to engage Asia Pacific customers in their local markets.

 

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