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Technology

Alibaba passes IBM in cloud computing and is winning business from European and US clients

In cloud computing, Alibaba is primarily known for its rapid growth in China, where the company has long been the leading player in e-commerce.

But it’s no longer just a force at home. In the first quarter, Alibaba surpassed IBM to become the world’s fourth-biggest provider of cloud infrastructure and related services, according to Synergy Research Group. It still trails Amazon, Microsoft and Google.

Alibaba is helping Chinese companies that want to expand abroad and also increasingly winning business from large customers elsewhere that are looking to crack the China market, which has long been a challenge for outsiders. Alibaba’s website shows that European companies, including InterContinental Hotels Group, KPMG, Nestle, Philips, SAP and Schneider Electric are all clients, as are U.S. customers like digital marketing company Conversant and mapping software provider Esri.

Alibaba and the rest of the world’s biggest technology companies are building data centers, staffing up and making acquisitions to handle the surge in workloads as more businesses shift their computing and storage needs to the cloud, Alibaba is second in China, behind Amazon Web Services, and is rapidly building out elsewhere.

“This is a game of scale and to be a market leader demands vast ongoing investments, a global presence and a global brand,” said John Dinsdale, research director at Synergy, in the report last week.

While Alibaba is making inroads, it’s still way behind AWS, whose market share is holding steady at around 40 percent. But surpassing IBM is a notable achievement.

In the first quarter, Alibaba said its cloud business more than doubled to $699 million in revenue, after doubling in the last fiscal year to $2.14 billion from the prior year.

Tech companies don’t report cloud results in a consistent manner so getting comparable numbers is a challenge based on what they disclose. For example, IBM doesn’t report its cloud infrastructure and platform as a service revenue. The company said in the first quarter that its annual run rate for cloud delivered as a service rose 25 percent to to $10.7 billion.

Alibaba’s ascent up the charts has been continual. Earlier this year it surpassed Salesforce, Dinsdale told CNBC in an email. To move into third place, Alibaba would need to oust Google, which said this year that it reached $1 billion in cloud revenue per quarter, between its Google Cloud Platform public cloud and the G Suite portfolio of productivity apps.

In a separate report released in April, Synergy said that while Alibaba was gaining share in cloud infrastructure, which includes hosted private cloud, it still held only 5 percent of the market, way behind AWS and also trailing Microsoft, IBM and Google.

Cloud management company Rightscale recently began asking about Alibaba for the first time in its annual survey of IT professionals. It found that 2 percent of the 997 respondents are running apps on its cloud. Meanwhile, Alibaba debuted on the annual Gartner report on cloud infrastructure as a service a year ago.

Alibaba’s cloud growth rate is expected to slip as the unit gets bigger. Analysts at Raymond James estimated in a May note that it could decelerate to about 87 percent growth next year, and around 60 percent the following year.

It also faces a long road convincing large global brands to store their most sensitive data with a Chinese tech giant.

“The company does not have substantial mind share with buyers in most markets, as it is still building the required local talent, industry expertise and go-to-market capabilities,” Gartner said in its 2018 report on the cloud infrastructure market. “Prospective international customers may also perceive security and regulatory compliance concerns when using a Chinese company, even though Alibaba Cloud has undergone third-party audits.”

Source: Tech CNBC
Alibaba passes IBM in cloud computing and is winning business from European and US clients

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