Chinese online shopping giant Alibaba may not be competing with Amazon for Americans' retail dollars just yet. But it's now stepping to its US rival in the cloud.
Today, Alibaba announced that its cloud-computing arm, Aliyun, has opened a data center in Silicon Valley. The expansion marks the first overseas foray for the company's cloud business. Nevertheless, Alibaba's initial goal appears to be serving the market with which it's most familiar, though in a different place.
"Now Aliyun hopes to meet the needs of Chinese enterprises in the United States," Aliyun Vice President Ethan Sicheng Yu said in a statement.
In China, the company says it offers cloud-computing services to more than 1.4 million customers via data centers in Hangzhou, Qingdao, Beijing, Shenzhen and Hong Kong. In its stateside expansion, Alibaba says it first plans to target Chinese enterprises based in the US but says it will offer cloud services to international clients by the second half of 2015.
Nationality may seem like an odd factor to consider in the cloud business. Aliyun, like its popular US counterpart, Amazon Web Services, provides an array of online tools that both businesses and independent developers use to build and operate all kinds of software, from web sites to data analysis tools to email services. No matter where they are, at least in theory, these tools allow companies to offer or run all sorts of online services without having to purchase and set up their own hardware tools.
But technology is only part of the picture for businesses migrating huge chunks of their operations and data onto the cloud. The more complex a business, the more complex its computing needs. And those needs are shaped in part by where a business is based. For Alibaba, opening up a data center in Silicon Valley is a no-brainer. You don’t score the largest IPO in history without knowing where the opportunities are. And starting out its expansion by offering its services to the companies it knows best is a savvy way to gain a foothold in the steep climb against Amazon on its home turf.
Still, there's a lot of cloud to go around. Some analysts putting the value of the cloud computing industry at more than $150 billion. In the US, according to a Forbes survey, 75 percent of companies said they used some form of on-demand online computing to operate their businesses. Amazon laid the groundwork with AWS a decade ago, but now it faces competition from Google, Microsoft and others. Alibaba now becomes the next name on that list.
It won’t be that easy for the Chinese firm. During its last earnings call, Amazon revealed that its cloud computing services are actively used by over one million customers. One survey suggested AWS could touch as much as one percent of all internet traffic in North America. But Amazon needs to be wary. In China, Alibaba has become a dominant online force. The next few years will show whether that dominance is something it can export.
