Alibaba secures US foothold as part of its global strategy

Following the building of its first datacentre in the US, as first announced in our blog of 10th November 2014, Chinese e-commerce company, Alibaba, has launched an Infrastructure as a Service (IaaS) cloud offering called Aliyun in the US. The company offers a range of IaaS cloud services including elastic compute, storage databases, content delivery, security and analytics products.

This is all part of a long term globalisation strategy to create data centres in Europe, Asia and the Middle East.  In the fourth quarter of 2014 Aliyun reported revenues of $147 million. So far Alibaba has been targeting Chinese enterprises in the US, but confirmed it is setting its sights on America’s largest ecommerce company, Amazon and its cloud computing division Amazon Web Services in the longer term to attract US business.  Alibaba’s cloud computing President, Simon Hu said, “We strongly believe our products and services can not only tap into demand from Chinese companies, but also serve overseas clients who run international businesses”.  By building up relationships with US hosting partners in Silicon Valley in recent weeks, Alibaba has taken a real step closer to achieving its early goals by gaining this foothold in the States.

Both companies are dominant in their respective markets for ecommerce and IaaS and the race is on now as each targets the others core customer base. However, both companies face a significant challenge in overcoming the natural suspicions of each nation towards the other on the topic of security.  Despite China being the world’s richest economy (having shipped US$1.623 trillion worth of goods around the globe in 2014, up by 48.5% since 2010), data control is a very different beast to sell in contrast to electronics, manufacturing and clothes.

Amazon along with Microsoft has sought to enter the Chinese cloud market, but legal regulations are making it difficult for both of them.  Alibaba for its part, had to develop datacentres outside China, if it was to argue against accusations of interference and controls from the Chinese government. However, given the speed of its economy’s growth in the last decade there is clearly significant opportunity in the world market for Chinese businesses to use Alibaba.

China-based Forrester cloud analyst Frank Liu believes this niche position of Alibaba’s having a China-centric customer base (going global), could prove compelling as China’s economy continues to expand.   This heritage may yet prove a difficult pill for US customers to swallow though. With only one week since the mass ‘cyber intrusion’ of 4 million US public sector workers (which security experts believe could only have originated from China or Russia), the thorny issue of trust within the data community will remain at the top of the agenda.

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