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Does China’s AliCloud Pose A Real Threat To Amazon Web Services?

Ben covers web and technology giants such as Google, Amazon, and Microsoft and their impact on the cloud computing industry, whilst also writing about data centre players and their increasing importance in Europe. He also covers future technologies such as drones, aerospace, science, and the effect of technology on the environment.

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With its latest investment, Alibaba pushes AliCloud’s global cloud ambitions even further, but can it take on global cloud competitors outside of China?

“Our goal is to overtake Amazon in four years, whether that’s in customers, technology, or worldwide scale.”

These are the words spoken last summer by Simon Hu, the president of Alibaba’s cloud computing division, AliCloud.

AliCloud has big ambitions. Taking on a worldwide cloud market worth billions of pounds in revenues, Alibaba’s cloud division is entering a tough competitive bazaar with its SaaS and IaaS servics. Amazon’s AWS, a company that could be considered its main cloud rival, hauled in revenues of around $6 billion last year, and dominates the public cloud space around the world. According to Gartner, the global public cloud services market will be worth $204 billion (£140bn) this year, up by more than 16 percent from 2015’s total of $175 billion (£123bn).

Expansion

Alibaba’s cloud is currently operational in six regions. However, five of them are in China. Its latest expansion move saw AliCloud head to Silicon Valley, where one data centre is already up and running and another is in the works. In Alibaba’s native China, the cloud vendor offers a range of infrastructure and cloud features, ranging from networking solutions to big data analytics, but its US efforts are limited to compute, storage, relational database services and load balancing. There is a seventh region currently being built in Dubai, where AliCloud also stepped up its partner program last year.

alibabaBut cloud boss Hu sees coming to the market (AliCloud was founded in 2009) later than its Western peers as a virtue. “Amazon, Microsoft and others have already laid the groundwork for us by educating the markets about cloud in the U.S. and Europe, so we have an even better opportunity to join in the competition,” he said last year.

So what of AliCloud’s grand ambitions?

“We aim at building an ecosystem globally that leverages our cloud computing expertise to efficiently and securely serve the needs of our clients all over the world,” an AliCloud spokesperson tells TechWeekEurope. “This is our ongoing commitment and we are confident to move it forward in international market.”

But analysts aren’t so sure about AliCloud international success, at least in the regards of posing a threat to AWS, in the short term.

“I’d say that “threat” is far too strong a word to use,” John Dinsdale, head analyst at Synergy Research Group, tells TechWeekEurope.

‘Crazy’ growth

“AliCloud is growing like crazy (more than 100 percent per year) and it is now opening data centres outside of mainland China (US, Hong Kong & Singapore opened; more planned in Japan, Germany and Dubai) and it is now a top ten player in cloud infrastructure services; but all that being said its current revenues are barely 5 percent the size of AWS and AWS itself is growing its revenues by more than 60 percent per year.”

Dinsdale, like many others, reckons that AliCloud’s near-future success will come from its appeal to both Chinese firms and companies that have strong links with China.

shutterstock_265259816“That does not prevent it from growing like gangbusters,” says Dinsdale, “but it I think its appeal will remain limited with audiences like mainstream US enterprises and US users.”

But AliCloud’s share of the worldwide market, Dinsdale notes, is “well under” two percent. That miniscule global share, coupled with a market that is undergoing extraordinary growth, means that AliCloud shouldn’t give competitors too much to worry about in the short term.

Andreas Olah, analyst at IDC, tells TechWeekEurope that there are also other concerns which could hold back AliCloud adoption around the world.

Olah says that there could be “worries about [the] Chinese government potentially accessing data” that could scare off potential customers, especially those in the public sector.

But Olah says that for companies in Europe and the US who are seeking a presence in China, AliCloud could be a viable option for cloud resources hosted in China for an Asian customer base. AliCloud also looks to have a promising future in gaming, says Olah, who thinks gaming “could become one of the first major industries to make use of AliCloud globally due to specific solutions offered and less sensitive data processed”.

Too early

“Overall, it is still too early to see AliCloud as a challenger to AWS outside China, but it could emerge as an alternative,” says Olah. “We don’t expect large European companies to host their critical workloads on AliCloud anytime soon.”

Alibaba has ploughed billions of dollars into AliCloud over the past twelve months. Last July came the announcement of a $1 billion funding effort to help AliCloud go global. Just last week, another announcement came regarding a $1 billion partnership between AliCLoud and Nvidia to focus on machine learning and artificial intelligence.

It’s still early days for AliCloud outside of China. With AWS and others (IBM, Microsoft, Google) still managing to grow exponentially year after year, it’s hard to see how AliCloud could catch up. This year could well see AliCloud attempt to gain market share in sectors where the other cloud providers fall short, and focus on the vast Asian markets where Alibaba already holds dominance. But it has to act fast. Even in Asia, there’s going to be an American data centre at every turn.

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