San Francisco-based enterprise software company Salesforce.com has entered into a strategic partnership with Chinese e-commerce giant Alibaba Group in a bid to make deeper inroads into mainland China, Hong Kong, Macau, and Taiwan.
Why it matters: The partnership with Alibaba comes at a time when Washington has made it increasingly difficult for American tech companies to sell products to Chinese customers. One hotly disputed topic in the months-long trade war has been limitations on US tech companies’ ability to retain their IP and operate their businesses in mainland China.
- Foreign cloud services provider footprints in China’s lucrative cloud market are largely restricted by local regulations. For example, companies have to set up a joint venture with a Chinese partner and ownership is capped at 50%.
- However, during trade talks between the US and China, authorities hinted earlier this year that the restrictions on foreign providers could be lifted.
“As the leading cloud service provider in the Asia Pacific region, our cloud infrastructure and data intelligence platform combined with Salesforce’s market leading solutions for Sales, Service, Commerce and more will provide global customers with incredible customer experiences at every touchpoint.”
—Ken Shen Tao, vice president of Alibaba Cloud Intelligence
Details: Salesforce announced its strategic partnership with Alibaba on Wednesday at the Alibaba Cloud Summit in Shanghai.
- Under the agreement, Salesforce and Alibaba are mutually exclusive partners: the US company’s CRM products will be available customers in the region exclusively through Alibaba Cloud, and Salesforce is the only enterprise CRM software Alibaba will sell.
- With Alibaba, Salesforce sell its cloud-based CRM solutions including Sales Cloud, Service Cloud, Commerce Cloud, and Salesforce Platform to customers in the region.
Context: Alibaba’s cloud computing arm dominates nearly half of China’s market and is on its way to becoming a major player in the global cloud market. Last year, Alibaba widened its lead over top cloud providers like Amazon Web Services (AWS) and Microsoft’s Azure in Asia markets.
- Like most foreign software companies in China, Salesforce has a limited market presence. In May, its rival Oracle Corp slashed around 1,000 employees in China.
- Salesforce, a top seller of CRM software, said in March that it planned to double its revenue in four years, signaling the importance of gaining access to the China market.
- Although the bulk of Salesforce’s business still comes from the Americas, its sales in the Asia Pacific region (APAC) as well as Europe, the Middle East, and Africa (EMEA) each saw a significant year over year growth of 25% in 2018.