With the economy in turmoil, Alibaba to spend big on pipes and plumbing to catch up with Western rivals

Chinese retail-'n'-cloud giant to splash $28bn as coronavirus pushes the online markets up


In a world so disrupted by COVID-19 that many are wondering where their next pay packet will come from, the biggest sellers of cloud tech are trying to prove who has the deepest pockets.

As businesses all of a sudden see the pressing need to offer the remote working and flexibility inherent in the cloud computing, Alibaba, the Chinese ecommerce giant, has committed to spending $28bn on cloud data centres, operating systems, and hardware over the next three years.

"The COVID-19 pandemic has posed additional stress on the overall economy across sectors, but it also steers us to put more focus on the digital economy," said Jeff Zhang, president of Alibaba Cloud Intelligence in a statement sent to The Reg.

To put that in perspective, analyst firm Canalys estimated the total global cloud infrastructure spend at $107bn for 2019. It expects the total global cloud investment to be around $141bn in 2020, an increase of 32 per cent.

Alibaba, which owns Alibaba Cloud, is far from the biggest recipient of those dollars, but nonetheless it's always in the top four, more or less neck and neck wth Google Cloud.

According to last year's figures, AWS led the pack in terms of cloud infrastructure revenues, hauling in $34.6bn, with Microsoft Azure quite far back in second place with $18.1bn. Google Cloud and Alibaba reported sales of $6.2bn and $5.2bn respectively.

Clearly, Alibaba sees the shift in online behaviour prompted by the virus outbreak combined with China expecting to lift lockdown restrictions earlier than western nations, as an opportunity to grow.

It is investing in "next-generation data centres" which includes operating system, servers, chips and network.

"Over the past decade, [Alibaba Cloud] has developed its proprietary technologies across the board including the Apsara Distributed Operating System, AI-inference chip Hanguang 800, X-dragon Architecture, RDMA (Remote Direct Memory Access) high-speed network, Super Computing Cluster and leading network devices such as VSwitch," Zhang added.

Alibaba's investment follows a commanding lead in China's national cloud computing market: Canalys found it had a 46 per cent share in the fourth quarter while Tencent Cloud had 18 per cent and Baidu Cloud just 8.8 per cent.

But Alibaba lags far behind American rivals across the globe - Canalys had AWS pegged at 32.3 per cent of the worldwide public cloud market in 2019, with Microsoft Azure at 18.1 per cent and Google Cloud Platform at nearly 5.8 per cent. Alibaba had 4.9 per cent of the spoils.

There are only so many companies with deep enough pockets to make inroads in the market during what is expected to be a deep recession. With $56bn in revenue in 2019, Alibaba is among the lucky few. The other stragglers in the cloud market, namely Oracle, VMware and SAP, will be watching Alibaba's investment in awe and wondering if they have enough gas left in their core markets to keep up. ®


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