The Cloud Computing Services market today is dominated by the ‘Big Four’, the four Corporate Giants – Amazon with Amazon Web Services (AWS), Microsoft with Azure Platform, Google with Google Cloud and IBM with IBM Cloud. As per market analysts, the four players are likely to consolidate the market further which would mean a lot of smaller players going out of business. However, let us wait a minute. Are the analysts right? Don’t we have one more player knocking at the doors, can get into the block, and even overcome the leader?
The Chinese giant, Alibaba, a global leader in ecommerce could be a proverbial “dark horse”. The company is planning to set up data centers all around the world to challenge the might of Amazon in web services. Alibaba Group Limited intends to invest about $1 Billion in its cloud computing unit – Aliyun and this could lead to a head on battle between two ecommerce giants.
Amazon today has 28 % of the global Cloud market and is way ahead of the other competitors in this space, as it is followed by Microsoft at 10%, according to a report by Synergy Research Group. Over the last few years, Amazon has been setting up large data centers across the globe in order to serve customers outside the US, and also in some cases to abide by regional regulations regarding localization of servers. Amazon, unlike its competitors has targeted China opening a data center in Beijing. During its expansion across the globe, Amazon has faced almost no competition from locations such as Brazil, Ireland and Singapore. However, China is a completely different ball game for it. While Amazon claims to have more than 1 million customers globally, Aliyun claims to already have 1.4 million customers, a large part of which is from the Chinese market. Alibaba has considerable support from the Chinese Government like other Chinese companies. It collaborates with twelve Chinese provinces, regions and municipalities. It also has agreements with the China Central Government Procurement Agency and an undisclosed number of government agencies. While the numbers for Amazon could be lower, it has very large accounts across the globe unlike Alibaba.
Aliyun, which is a spin off from Alibaba started its operations in 2012. It has five data center hubs in Asia: Beijing, Qingdao, Hangzhou, Hong Kong and Shenzhen. It also has a data center set up in USA where it targets the segment of Chinese customers, unlike Amazon which has more of the American customer base. Like Amazon, it has a strategic tie up with Intel to do custom chips and therefore is working on experimentation on low power server processors. A non-standard architecture by customizing these chips would enable Alibaba to save money in its mammoth electricity bills. This would enable the company to join the ranks of Google, Microsoft and Amazon in terms of scale and availability of engineering talent.
As per available estimates from analysts, the global cloud computing market today is about $20 billion. Alibaba has suggested that the investments in data centers for Aliyun would primarily target the Middle East, Singapore, Japan and Europe.
In the Middle East, Aliyun has recently tied up with Meraas, a Dubai based company and signed a joint venture agreement to extend services to customers in North Africa and the Middle East, targeting both the private and the public sector or government companies. This joint venture will be strategically located in the cosmopolitan city of Dubai, and focus on creating apps, big data tools and cloud computing architecture for local clients.
This strategic joint venture seems to be a golden goose for Aliyun as Dubai plans to transform itself into a “smart city”, establishing an online platform connecting 1000 services over the next two years. A recent IDC report indicates that the expenditure on ICT products and services in the Middle East and Africa would cross the $270 billion mark in 2015 with the IT market expected to increase by 9%. Since the SaaS segment is really going to explode and increase by 29%, cloud services will be the key for business growth in the future. Aliyun’s growth plans however would depend on and could even be stymied based on how fast the smart cities come up.
Aliyun has also formed a strategic partnership with Yonyou Software. This partnership would help Aliyun leverage the cloud computing, digital marketing, big data and ecommerce customer space in Asia. As such Yonyou Software ‘claims’ to be the biggest Enterprise Software Vendor (ESV) in the Asia-Pacific and also the largest vendor of software in China. While this is a good move, the partnership is again a regional move, and cannot give it a global imprint.
Aliyun’s global growth is expected to be fuelled by the Marketplace Alliance Program, which is designed to add new clients from North America, Asia, Europe and the Middle East. Some of the tech companies in alliance are Intel, Singtel, Meraas, Equinix, PCCW, LINKBYNET, and Towngas. However, the range of collaborations need to be increased drastically over the next few years and that would mean considerable investment.
Alibaba’s plans cannot be ignored. However, globally, Amazon is the leader and it would take considerable effort and additional investment on part of Alibaba to reach the top. It has limited coverage in larger markets like North America and Europe. We have to remember that Amazon is a leader with lot of reach and the company would not easily let Aliyun to have its sway. I feel that for the time being Aliyun would do well globally with the Chinese customers, and probably in locations where they are the first movers. However, Amazon has undoubtedly the advantage with its global reach and services to vast segments of customers, not only the Chinese, and would continue to hold the fort for the immediate future.