In their letter to shareholders, Jack Ma and Alibaba CEO Daniel Zhang both emphasised the importance of cloud computing to the e-commerce giant’s future
Top brass at Alibaba Group — Executive Chairman Jack Ma and CEO Daniel Zhang — have indicated the company will put heavy emphasis on its cloud computing technology in the coming fiscal year, according to two letters to shareholders released today.
Ma and Zhang were on the same page in the letters and both highlighted the gains made in cloud computing in 2016, while underscoring its development as a top priority for fiscal year 2017.
In his letter, Ma wrote that Alibaba is not trying to build a buy/sell marketplace, but rather an entire infrastructure in which merchants would use Alibaba from step A to Z.
He pointed to the fact that 35 per cent of Chinese websites use Alibaba Cloud as a metric of success, but the tone of the letter suggested plans to accelerate its growth in the coming year.
“Supported by the twin pillars of cloud computing and Big Data, our goal is to empower merchants with the ability to transform and upgrade their businesses for the future,” Ma wrote.
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He went on to call the widespread adoption of cloud computing “important” before diving into his theory that the internet is currently at an inflection point, in which the past 20 years of disruption will be “followed by 30 years of further rapid change as new technologies are applied throughout society.”
“Over the next 30 years, with computing power as the new ‘technology breakthrough’ and data as the new ‘natural resource’, the landscape of retail, financial services, manufacturing and entertainment will be transformed,” Ma wrote.
As for Zhang, his letter defined Alibaba Cloud as the creator of this ecosystem.
He said the service is, “steadily emerging as service providers on its platform grow and certification standards for cloud-based services are developed in cooperation with government”.
The infrastructure development is not a new strategy for Alibaba, but in last year’s letter to shareholders it largely focussed on its logistics company Cainiao. If the success of Cainiao last year is any indication, Alibaba Cloud could be set for takeoff in 2017.
One logistical step toward achieving this goal was taken today. In a separate announcement, it was revealed that US-based Datapipe will now be the Global Managed Service Provider for Alibaba Cloud. This means the company will support the design, build, deployment, and management of Alibaba Cloud.
If investment in Alibaba Cloud is accelerated, Jack Ma will once again be directly challenging Amazon for superiority in the global e-commerce landscape.
Amazon Web Services
Amazon Prime, the Echo and the Kindle are all nice value-add revenue streams for Jeff Bezos’ company, but none of these services can hold a candle to the impact made by Amazon Web Services (AWS).
For many startups, it has nearly eliminated a serious barrier to entry for young companies with little money: server costs.
According to MarketRealist, AWS is three times the size of its second-largest competitor.
The same article put forth an amazing statistic. Oracle and Microsoft (no spring chickens) grew their cloud computing businesses by 100 per cent and 152 per cent respectively and were still dwarfed by AWS. Oracle’s cloud service is one third the size of AWS and Microsoft’s Azure is one sixth.
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Alibaba’s challenge is it can not enjoy the WeChat phenomenon — in which a dominant company can mature in an isolated ecosystem because global competitors are banned. AWS is active in China and can directly compete with Alibaba in Asia’s largest country.
The impact AWS has made on Amazon — and to a lesser extent Alibaba Cloud on its parent company — highlights why the two e-commerce giants view successful cloud infrastructure development as essential to the future success of their businesses.
Alibaba will face a serious challenge if it wants to legitimately take on AWS. But Jack Ma correctly understands that doing so will be the most important undertaking for Alibaba in the near future.
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