Alibaba continues Quixotic quest to take on AWS

Posted by Ron Miller on Nov 22, 2016 11:55:00 AM

12811650773_294289d2ca_z.jpgAlibaba announced an ambitious plan to expand its worldwide data center presence today. The company wants to have local presence across Europe, Asia, the Middle East, and Australia. It hopes that having a more extensive worldwide presence can help it take on AWS, Microsoft, IBM, and Google (and even Oracle) in the cloud infrastructure game.

While it's a sensible move to try and expand its data center footprint, the reality is that Alibaba came very late to the cloud computing game. A decade into the Infrastructure as a Service market, there are clear market leaders. While the revenue pie is expanding, the idea that Alibaba can make a significant dent in the market outside of China is a longshot, at best. (Although it's worth noting the Chinese market itself could be by its sheer size significant.)

Back in August 2015, Alibaba announced a $1 billion investment to launch Aliyun, its cloud infrastructure arm. What's more, it set a rather ambitious, some might say foolish goal, that it would catch AWS in four years. Subscribe to the Intronis blog

While the company has been growing fast with triple digit growth over 6 quarters, it's important to remember, that they are growing from very small numbers to a slightly bigger small numbers. While triple digit growth isn't anything to scoff at, it's important to keep it in perspective and remember that it's still a very small percentage of Alibaba's overall business — and has yet to become a profitable division in spite of that growth.

Tough to break the AWS hegemony

As we've discussed here before, according to market share numbers from Synergy Research, AWS has a significant market share lead with over 30 percent. The next closest rival is Microsoft with around 11 percent, IBM has around 7 percent, and Google has around 5 percent. After that, we see Alibaba packed in a group of 20 other companies that includes the telcos, Rackspace, Oracle, and others.

Of course, one thing Alibaba has is plenty of money, so spending some of it to expand into other regions certainly makes sense. It's just important to keep in mind that the company is facing an uphill battle when it comes to gaining enough market share to break out of the group of 20 other companies it finds itself in.

If I were a betting man, I would think Oracle would break out of that group first because it has enterprise credibility and existing customer base already. Unlike Alibaba, which is starting from scratch with no real business experience outside of its eCommerce strength, Oracle has been working on-prem in the enterprise for over 30 years. It can leverage that experience and customer base as it moves to the cloud. Yet, even Oracle faces a serious challenge.

Alibaba's story may sound a lot like Amazon's, starting as an eCommerce company, then shifting to a cloud company over time. The difference is when AWS started, IaaS was a green field. Nobody was thinking about infrastructure in the cloud.

Today, it's a very different landscape, with many different players vying for the market, and while there is room for plenty of growth here, realistically Alibaba faces a tough go as it tries to gain a strong foothold in the market, especially outside of its home market in China. It's probably safe to say that the 4-year target to catch AWS is one Alibaba won't make, but if it can get on the board and catch Google, that would be some progress — and even that remains an extremely long shot.

Intronis MSP Solutions State of the Industry Survey

Photo: leighklotz on Flickr. Used under CC by 2.0 license.

Topics: Cloud Trends

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