Chinese e-commerce, media and technology giant Alibaba is planning to follow in the footsteps of Amazon and have its cloud computing business surpass its retail origins.
Alibaba CEO Daniel Zhang revealed the intention to CNBC yesterday, stating that cloud computing will likely be the “main business” for Alibaba in the future.
“We strongly believe that every business in the future will be powered by cloud. We are very happy to build this cloud infrastructure in a new digital era and support all business,” Zhang said.
The CEO also touched on the company’s recently developed AI chip, emphasising the importance of getting more computing power at greater levels of efficiency, and the need for specialised chips for specific business cases.
At present, Alibaba’s cloud business accounts for just 7 percent of its revenue. This is far below its $10.6 billion core commerce revenue, which grew 56 percent year-over-year in the third quarter and represents 85 percent of its total revenue.
However, its latest financial results reveal that revenue from cloud computing increased 90 percent year-over-year to $825 million.
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Nonetheless, the kind of growth they’re looking for won’t come cheap, nor will it be easy. Alibaba may be a go-to brand in China but internationally they will be competing with well establishing cloud computing leaders in AWS, Microsoft Azure and Google Cloud.
IBM’s purchase of Red Hatmakes them a major competitor too.
Alibaba’s rapid growth indicates a sound strategy, though, and their belief in the future importance of cloud is well placed.
Their recent growth in the cloud space was driven by an improving revenue mix of higher value-added services and robust paying customer growth. During the last quarter, Alibaba Cloud launched over 600 products and features, including those related to big data analytics and AI application innovation, security, and IoT service enhancements.
In September, Alibaba Cloud launched Apsara 2.0, an upgrade to their cloud computing operating system based on their own proprietary distributed computing architecture. The system provides enterprises with enhanced computation performance, flexible hybrid cloud implementation and more efficient network connection.
With the upgrade, developers can leverage Alibaba Cloud IoT solutions to bring edge computing capability to connected devices at scale and seamlessly integrate with cloud networks.
However, the company has some way to go to reach feature parity with the big cloud providers.
How the figures stack up
Contrast Alibaba’s revenue composition with Amazon, whose AWS cloud revenue has now surpassed its retail business, bringing in over $6 billion in revenue in each of the last two quarters, with growth approaching 50 percent year-over-year.
Clearly Alibaba has its work cut out to compete with these figures but, given that cloud revenues grew at 90 percent year-over-year in Q3, this is the dominant growth area for the company.
Alibaba’s ubiquity in China, as well as it’s recent penetration into international markets have set up its cloud business for rapid expansion.
Its European cloud computing presence was reinforced last month when it announced the opening of two availability zones in the UK, in addition to its Frankfurt and Dubai data centres, launched in 2016.
This expansion not only extends Alibaba Cloud’s capabilities within Europe, but also serves to highlight the provider’s ongoing commitment to the region. Its local footprint is steadily increasing, with data centres across three EMEA locations: Frankfurt, Dubai, and now London.
With its latest facility, the company now operates 52 availability zones in 19 regions around the world, with more global regions set to follow.
Commenting at the time of the announcement, Yeming Wang, General Manager of Alibaba Cloud EMEA, said:
Our expansion into the United Kingdom, and by extension into Europe, is in direct response to the rapidly increasing demands we have seen for local facilities within the region.
“Using AI-powered and data-driven technology, our latest data centres will offer customers complete access to our wide range of cloud services from machine learning capabilities to predictive data analytics.”
The role of edge & AI
This emphasis on AI technology is mirrored by Alibaba’s recent hardware efforts. It plans to launch its first self-developed AI inference chip, which could be used for autonomous driving, smart city applications, and logistics, this year.
Alongside this it will make customised AI chips and embedded processors to support the push into cloud computing and the Internet of Things (IoT).
In September this year, Intel and Alibaba Cloud announced the launch of the Joint Edge Computing Platform, an open architecture for Internet of Things (IoT) applications that integrates AI and cloud technologies for edge computing.
The device-to-cloud IoT platform offers enterprise customers customisable solutions for different IoT applications, including industrial manufacturing, smart buildings, smart communities, and more.
The move was typical of cloud providers this year, who are all looking to flesh out their edge computing and IoT offerings. For example, Google’s announced new Edge TPU and Cloud IoT Edge products in July.
We explored just how transformative such technology can be when we spoke to Product Lead Indranil Chakraborty at Google Cloud Next.
If Alibaba is to realise its ambitions for its cloud computing arm, expect edge computing and AI to play a key role.