Alibaba Cloud, the cloud-computing arm of Alibaba, is one of the internet giant’s most successful business units. Maintaining robust growth momentum, the nine-year-old unit recorded a revenue of RMB 4.7 billion ($710 million) in June quarter of 2018, a 93% YoY jump driven by higher value-added products and services and robust growth in paying customers.
In line with Alibaba’s globalization strategy, Alibaba Cloud sped up its expansion to overseas markets three years ago and what the company has achieved so far is quite impressive. The service now has 49 availability zones across 18 economic centers globally, with coverage extending across mainland China, Hong Kong, Singapore, Malaysia, Indonesia, India, Japan, Australia, the Middle East, the European Union, and the US.
But the company has bigger plans for the global market. Simon Hu, President of Alibaba Cloud, projects their local and overseas businesses to make up half their total business each. “We haven’t reached that yet, but it’s a goal we are fast approaching,” Hu told TechNode at The Computing Conference held in Hangzhou.
Building the overseas arm from scratch three years ago, Alibaba Cloud has encountered lots of challenges. Language is obviously the first barrier, but the most critical challenge lies in creating trust with clients. Compared with payment and e-commerce, the globalization of cloud computing services is a more daunting task because it’s not about one technology, but rather a place to hold application system and data for clients. For most of the time, it needs not only a trust in Alibaba, but a trust in Chinese firms, or ultimately a trust in China as a country, according to Hu.
“In the first three years of Alibaba Cloud globalization efforts, we have invested a lot of energy in complying with local laws, integrating into the local community, and supporting local infrastructure constructions. I believe we have basically solved the trust issues among users,” he added. “I give a score of 80 points to our performance in the globalization process.”
As a fundamental infrastructure for the flourishing of other online services, the globalization of Alibaba Cloud has paved the road for overseas expansion of other services under the Alibaba Group, such as its e-commerce businesses and Alipay, as well as Chinese companies that aspire to go beyond the domestic market.
For fellow Chinese firms embarking on their globalization journeys, “. . .[i]t’s important to keep in mind that respect for local laws, local employees and local community are the priorities, while technology and capital support come after that. We attach great value to the conversational mechanism between our company and the market we are operating in,” said Hu.
“Alibaba Cloud in Japan is operated in partnership with SoftBank because Japanese companies want more localized services offered by Japanese companies. Meanwhile, the service in India is offered directly by the Alibaba Cloud team. In a more crowded market like the US, we focus on medium- and small-sized clients, Chinese companies going abroad and overseas coming to China. We adopt different strategies for a different market, but the underlining principle is the same respect for the local market,” Hu explained.
In addition to being China’s largest provider of public cloud services, Alibaba Cloud is also the number four player globally in the IaaS (Infrastructure as a Service) market by revenue in 2017, according to IDC. It among the world’s top 3 IaaS providers according to Gartner.
Despite its growth, however, the company is still playing catch-up when compared with foreign counterparts, like Amazon and Microsoft. Hu holds a confident but modest attitude when talking about the rivalry with existing cloud computing giants.
“US companies have pioneered in the cloud computing industry and made great contributions to the world. As China’s tech scene grows, it’s our great honor to join the league and take corresponding responsibilities to drive the development of the human race. China’s cloud computing capacity will take 20% or even more of the global market in the future five years,” said Hu.