China's Alibaba Cloud cuts prices in bid to lure customers

Only in the Middle Kingdom as company reportedly eyes IPO

Alibaba - China's equivalent to AWS - is bucking the global trend and cutting the cost of its cloud services instead of hiking them, but the bad news for potential takers is that only customers in China will benefit.

The Cloud subsidiary of Alibaba - one of the world's largest e-commerce operations - is making cuts of up to 50 percent to the cost of some tech services, apparently in a grab for market share, ahead of a possible IPO.

The company told The Register the price cuts will cover some Elastic Compute Service (ECS), Object Storage Service (OSS), network, database, Content Delivery Network (CDN), and security products available in the Chinese market.

A spokesperson said the decision was "in line with Alibaba Cloud's commitment to making computing power more inclusive," and that "this large-scale price reduction is to return more technological dividends to customers and partners, to continue to reduce the cost of using the cloud and expand the market space of the cloud."

Costs keep climbing

Last year, market-watcher Canalys forecast that the cost of public cloud services would jump in the US and Europe, with Americans seeing rises of a fifth and Europeans seeing increases of almost a third, due to rising energy costs and other factors.

Things might not have got so bad yet, but Microsoft put up prices for its Microsoft Cloud products in Europe by between 9 and 15 percent from the start of April this year, and Google also increased prices for some products in March such as Google Workspace. (Google Cloud also announced its first ever profit this week).

According to Bloomberg, one reason for Alibaba Cloud's price reductions is that it has been losing market share to local competitors. Despite this, it is regarded as one of its parent company's fastest growing subsidiaries, and said to be a prime candidate for a future initial public offering.

Earlier this month, the company unveiled its own AI large language model (LLM) called Tongyi Qianwen, which is being touted by Alibaba Cloud as an answer to OpenAI's ChatGPT. This will be integrated across Alibaba’s various businesses ion a bid to improve user experience, while customers and developers will have access to the model to create their own customized AI features, it said.

Speculation about a potential public offering possibly comes from the reorganization that parent company Alibaba Group Holding announced in March, which will see it break itself into six smaller entities.

One of these is the Cloud Intelligence Group, which includes Alibaba cloud, the DingTalk collaboration platform, and Alibaba's AI business. The Group would be free to raise external capital and potentially to seek its own IPO, as we reported at the time.

Meanwhile in the UK, the communications regulator Ofcom recently said it intended to call in the government's competition watchdog over concerns that the three big players may be stifling competition in the local cloud marketplace. ®

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