Last week, Alibaba decided to get more serious about the world cloud infrastructure market, announcing a billion dollar investment in its cloud computing arm, Aliyun.
The billion dollars could be considered a shot across the bow of Amazon Web Services, as well as its rivals Google Cloud, Microsoft Azure, IBM Softlayer, and a host of others.
If you doubt that, consider that Aliyun president Simon Hu told Reuters, "Our goal is to overtake Amazon in four years, whether that's in customers, technology, or worldwide scale."
While it would probably be a mistake to completely dismiss this statement, Alibaba clearly has its work cut out for it as it goes up against a very competitive market dominated by AWS. Even players in this market with significant financial clout like Google, Microsoft, and IBM are having trouble denting Amazon's dominance.
The good news is the market is growing, and Gartner predicts it will expand by almost a third, up over 32 percent in 2015. This growth leaves some room for another player to sneak in, but even one as financially powerful as Alibaba will have trouble competing with the likes of these companies.
When Alibaba landed the largest IPO ever, raking in a cool $25B on the opening day, it was clear that the Chinese tech giant was going to be a player in whatever areas it chose to compete. With that kind of cash, it could explore all kinds of possibilities, including cloud infrastructure services.
The company has several data centers, mostly in Asia, but they also have one in California devoted to cloud infrastructure services. Instead of investing more in the U.S. market, Alibaba is looking at the Middle East, Singapore, Japan, and Europe, according to an article in TechCrunch.
A billion here, a billion there ...
A billion dollars appears to be the magic number when it comes to cloud investments, with IBM investing $1.2B in Softlayer after it purchased the company in 2013, HP committing to a billion-dollar cloud investment in May 2014, and Cisco joining the billion dollar cloud investment club in September 2014.
Alibaba can spare the billion dollars, and going after specific niche markets might be the way to go, perhaps trying to exploit areas that might be reluctant to deal with U.S. cloud companies in light of of NSA spying revelations. Of course, dealing with a cloud company from China has some baggage as well.
Regardless, Alibaba wants a piece of this market, and it has the financial means to give it a shot. But bold talk aside, it's going to take a huge investment in what is increasingly a low-margin market. Alibaba will probably have to slash prices to get attention. In that light, the effort seems a little frivolous to be honest, but when you have their kind of money, you can afford to be.
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