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From: FUBHO12/26/2017 11:57:47 AM
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Alibaba Cloud Gears Up for ‘Serious Combat’ Against AWS in 2018

sdxcentral.com


December 26, 2017
5:00 am PT

Alibaba Cloud wants to compete globally with Amazon Web Services (AWS). And this will mean growing its U.S. presence.

China’s biggest public cloud provider already has data centers in Silicon Valley and Virginia. It also partners with U.S. companies including Nvidia and Cisco on cloud data center technology.



The company’s cloud revenue increased 99 percent year-over-year, according to Alibaba Group’s second quarter fiscal 2018 earnings call last month. “Our cloud computing business continues to defy gravity,” Alibaba Group CEO Daniel Zhang told analysts, according to a Seeking Alpha transcript.

And at its AliCloud conference in October, the company committed to invest $15 billion over the next three years in cloud computing research and development.

Globally, Alibaba is the No. 3 infrastructure-as-a-service (IaaS) public cloud vendor, according to Gartner’s latest numbers. Compared to public cloud leader AWS (44 percent) and No. 2 Microsoft Azure (7 percent), Alibaba trails behind with only 3 percent of the global market share for 2016. But its growth — almost 127 percent from 2015 to 2016 — far outpaces its top two competitors.

“That tells us they are getting very aggressive in terms of growth strategy,” said Gartner analyst Sig Nag, who authored the cloud market share research note. “Their largest market has been China, but they are clearly moving westbound.”

On December 20, the company announced a new cloud data center in India,“a key market in Alibaba Cloud’s globalization strategy,” according to the announcement. Alibaba Cloud now has 33 availability zones across 16 economic centers globally, with coverage extending across mainland China, Hong Kong, Singapore, Japan, Australia, the Middle East, Europe, India, and the U.S.

Nag predicts Alibaba’s westward expansion will start with Europe before growing its presence in the U.S. “It still has limited presence beyond China, but I think that will change in the coming year,” he said.

Earlier this month, Alibaba announced cloud compliance accreditation with Germany’s federal office for information security.

IDC analyst Chris Dong agrees 2018 will be a big year for Alibaba Cloud. “I will say 2018 is the year of serious combat,” he said.

U.S. Cloud StrategyThe company’s two U.S. data centers primarily cater to Chinese companies operating in the U.S. “But they are trying to iron out a more flexible strategy, and they have been really aggressive in helping small and medium [U.S.] businesses sell into China,” Dong said, adding that Alibaba has also launched several initiatives to help U.S. companies work around Chinese regulations.

Software-as-a-service (SaaS) is growing almost 10 times faster than traditional, on-premises software among Chinese enterprises, Dong said. So there’s a huge incentive for U.S.-based software companies to sell to the Chinese market and run on Alibaba Cloud.

“As U.S. companies go to China through those programs, synergy will be built,” Dong said. “Once they have that synergy, the benefit for Alibaba is two-fold. One, they will eventually be able to host the same SaaS in the Alibaba Cloud in the U.S. And second, they will be able to more quickly deploy their services in the U.S.”

In other words, helping U.S. companies sell to China is a great go-to-market strategy for Alibaba’s cloud services in the states.

Moving Beyond IaaS IHS Markit takes a more tempered view of Alibaba Cloud’s plans for world domination. While the company’s IaaS business is strong, it doesn’t have significant platform-as-a-service (PaaS) or SaaS offerings. And even its IaaS is still light-years behind AWS in terms of market share, said IHS Markit analyst Cliff Warner.

“In certain regions it’s possible that they could take on AWS,” Warner said. “But it would be more because of a regional differentiation than a product differentiation. Inside North America we don’t see the traction and the expansion.”

Nag said Alibaba Cloud still lacks capabilities and feature functions needed to contend in the U.S. market. It also needs the large software and partner ecosystems that AWS, Google, and Azure have built over the years. And being a Chinese cloud provider brings with it certain data protection issues.

“Because of the lack of enterprise-grade offerings of AliCloud, we don’t recommend migrating mission-critical workloads into AliCloud or sensitive data because they are a China-based provider,” he said. “How do they overcome that and become a global player that is agnostic of their Chinese heritage — that is going to be critical.”

Still, Nag said AWS and other cloud providers should be worried. “They should absolutely be worried. Unlike them playing in the China market, the U.S. market is fairly open. For AWS to enter the China market they have to partner with an in-country provider, and no such regulations exist in the U.S.”
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