China’s Alibaba CloudOpens a new window is opening two data centers in London as it boosts its European offerings and takes on rivals Amazon Web Services, Microsoft Azure and Google Cloud.
The London data centers will ensure Alibaba Cloud is in position to up the ante in the UK, reportedly the biggest public cloud market in Europe as well as the location where companies are early adopters of cloud services. The two new locations add to the Alibaba data centers already operating in Frankfurt and Dubai, and were opened in 2016 to serve the EMEA market.
Alibaba has experience in large scale operations, thus already strongly positioned to appeal to retailers and merchants involved in rapid transactions. During last year’s China Singles Day, Alibaba’s e-commerce operation sold $1 billion worth of goods in its opening two minutes, and had confirmed sales of $10 billion in over an hour, figures that translate to handlingOpens a new window over 325,000 e-commerce transactions per second. Such impressive examples of data-juggling capability could persuade the bigger European operators to sign up for cloud services. Alibaba Cloud is also planning to target areas where the Alibaba parent company has strong operations in China, such as finance, entertainment and media.
Centers to Position Alibaba for Global Position
The two London data centers will buffer disaster recovery services, ensuring that operations can continue uninterrupted in case of a malfunction. Using AI and machine learning to drive its cloud technology, the centers will provide services such as elastic computing, allowing for spikes and slumps in network demand, as well as offering storage, database, network and application services and big data analytics.
Some European customers have existing partnerships with Alibaba Cloud in China and are looking to it for global coverage. Ascential, the global business information services group formerly known as EMAP, first worked with Alibaba Cloud in China and is now expanding into the UK.
Alibaba Cloud can potentially benefit from the trend using multi-cloud solutions, with a variety of providers offering infrastructure-as-a-service operations. This structure allows businesses to avoid losing data or going offline if a service failure occurs, and is also a way to avoid being locked-in with a single vendor.
Alibaba Cloud will need to expand rapidly to get near its big US rivals: Amazon’s AWSOpens a new window currently holds 40% of the global public cloud market. The figures for the first quarter of 2018 show that AWS, Microsoft Azure and Google Cloud account for 60% of the market, but Alibaba’s huge share of China’s cloud market and rapid growth across the world has helped it surpass IBM’s market share, positioning it fourth in the global rankings. Despite this, Alibaba does not feature in the top five providers in any region of the world other than Asia Pacific, meaning a huge task lies ahead in breaking into the European market, and Chinese connections will need to be leveraged.
Cloud is the Battleground for Profit
The cloud battle comes amid a wider struggle between Alibaba and Amazon. Alibaba’s e-commerce operation leads the market in China and earned global revenues of $40 billion in 2017-18, while its cloud computing division accounted for $2 billion of its $10 billion sales revenue in the fourth quarter of 2017. In comparison, Amazon’s global sales were more than four times this, reaching nearly $180 billion in 2017, with Amazon Web Services cloud division generating $17 billion of the total. But while Alibaba brought in profits of around $10 billion in 2017, all Amazon’s 2017 profits of just over $3 billion were accounted for by AWS.
For both companies, cloud is a central battleground for profitable global growth. Alibaba is slowly expanding from its Chinese base as it seeks to take on the US giants, with its Ant Financial arm, for example, steadily building business in Europe, Asia and the US.
Its cloud offering can act as a Trojan horse into markets for its other services, such as e-commerce and finance. Amazon’s ability to build its cloud offering into its most profitable revenue stream shows that cloud provision will be a major driver of success in the technology business for years to come.