Alibaba versus Amazon, Microsoft and Google: Does the Chinese cloud challenger have what it takes?

Chinese public cloud challenger Alibaba is undoubtedly making waves in the west, but does it have what it takes to seriously trouble the likes of Amazon Web Services and Microsoft in the infrastructure-as-a-service market?

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While Amazon, Google and Microsoft have been busy doing battle in the public cloud market, the rise of Chinese challenger Alibaba may have gone unnoticed by some enterprise IT buyers.

According to market watcher Gartner, Alibaba is a third place provider within the infrastructure-as-a-service (IaaS) public cloud services market for a second consecutive year.

The company had a 7.7% market share, Gartner’s data shows, which is higher than Google’s 4%, but considerably lower than Amazon Web Services’ (AWS) 47.8% and Microsoft’s 15.5%.

As the dominant IaaS provider in China and number one cloud service provider in the Asia-Pacific region, Alibaba Cloud grew by a whopping 92.6% in 2018.

What may have passed some people by is the effort the company has gone to in recent years to build out its footprint elsewhere in the world, as it prepares to go to war with the US cloud giants.

As reported by Computer Weekly at the time, Alibaba opened datacentres in Frankfurt and Dubai in 2016 in response to customer demand in Europe and the Middle East for, what it termed, “comprehensive cloud services to enable business innovation”.

In 2018, it further expanded its European presence with two datacentres in the UK. Now, the company claims to have “61 availability zones in 20 regions”, which include Europe, the Middle East, and the east and west coasts in the US.

China: the big differentiator

When Computer Weekly asked an Alibaba spokesperson what differentiated the company from the US giants, the spokesperson responded with the usual marketing spiel around scalability, robustness and security, as well as enabling vertical specific cloud-based solutions.

However, the key point of differentiation the spokesperson mentioned is the one thing that none of the US giants have got a hold of just yet: China.

“Cloud is a means to an end, but not an end itself. Alibaba Cloud provides a first-class cloud ecosystem for companies to enter the Chinese market, and vice versa,” the spokesperson said.

According to the spokesperson, Alibaba’s cloud proposition is not just attractive to those Chinese companies wanting to go global, but also to other companies that want to crack the Chinese market.

Alibaba’s cloud proposition is not just attractive to those Chinese companies wanting to go global, but also to other companies that want to crack the Chinese market

With a population of 1.4 billion – the largest of any country in the world – and with the number of registered businesses in China growing from around 26 million to 35 million between 2016 and 2018, there are plenty of reasons for businesses to try to make a mark in China.

But how an IaaS offering relates specifically to that is questionable. Perhaps it is easier to do business with other enterprises that are using Alibaba’s cloud service, for example?

But Nick McQuire, an analyst at CCS Insight, says Alibaba’s existing strategy means it is not as attractive to companies that have no interest in the Chinese market.

“When you look at some of its limited partnerships, such as those with the European telcos, including Vodafone in Germany and BT in the UK, they haven’t made a massive difference to its customer count,” he says.

“These partnerships have been aimed at making Alibaba more localised for Europe, enabling it to run in a private cloud environment in their local datacentres but they haven’t been attractive to firms beyond those expanding into China or with the European operations of Chinese customers who use Alibaba in China,” he adds.

This is still a logical first step for Alibaba – trying to slowly build up a footprint with its one key differentiator – and perhaps the company will expand beyond this in the next couple of years.

Clouding out the competition

All of the cloud companies reiterate the mantra of focusing on the customer, not the competition. 

But with a growing market share, the biggest companies are continually being asked about Alibaba’s proposition. AWS CEO Andy Jassy claims that Alibaba is growing, but only in China – the cloud leader doesn’t believe that its competitor has yet made a meaningful mark in Europe or the US. That doesn’t mean the company is not taking notice.

“If you put Google and Microsoft to one side, which are typically considered the two big competitors, Alibaba is a company from a scale and an innovation and resourcing perspective that is there [competing],” Darren Mowry, managing director of business development for AWS in Europe, the Middle East and Africa (EMEA), and managing director of UK and Ireland, tells Computer Weekly.

“Specifically in the UK, we’re beginning to see it more and more, but I’d say it’s still very early days – while in other parts of the world, it’s quite significant,” he adds.

Alibaba is doing “interesting things” from a technology perspective, he continues, but – in terms of diversity and breadth – AWS is able to meet a lot more of customers’ needs.

Aside from that, Mowry believes the Chinese company will have a steep learning curve in regards to regulation, data and privacy in various different countries.

Furthermore, CCS Insight’s McQuire claims that Alibaba has failed to make any meaningful inroads into Europe or North America for several reasons.

“It’s primarily because its portfolio of capabilities is inferior compared with the other hyperscalers, especially when it comes to its international services around its in-country datacentre footprint, and security and compliance offerings,” he says.

“The biggest problem is that few local enterprises in Europe or North America fully trust Alibaba to run their mission-critical workloads”
Nick McQuire, CCS Insight

“The biggest problem is that few local enterprises in Europe or North America fully trust Alibaba to run their mission-critical workloads,” he continues.

In a recent CCS Insight survey of 400 senior IT decision-makers, Alibaba was the least trusted tech brand when it came to handling company data by a long distance, trusted by only 3% of the US and European firms surveyed.

This is exacerbated as a result of the current geopolitical environment – and it remains to be seen whether the company will be targeted in the same way that Huawei has been.

What is simultaneously of interest is that AWS is investing heavily in the Chinese market, with the recently launch of its AWS Marketplace China offering. Whether Chinese firms will be as receptive to AWS will depend on if they believe the cloud leader genuinely has more breadth in its offerings that can make a significant difference, while balancing this with any reservations about security, privacy and political tensions.

The likes of Microsoft, Google and Oracle will point towards the fact that Alibaba does not have a software-as-a-service (SaaS) presence as an indication that it doesn’t offer the full package of cloud computing services – a criticism that has also been directed at AWS.

It is worth remembering that a lot of enterprises have already begun placing their bets on one of the big three US cloud giants when it comes to moving more of their IT infrastructure off-premise.  And while they may not be locked in, as such, they might not be willing to move again just yet.

John Lewis Partnership CTO Andrew MacInnes for example, say the company is a Google Cloud Platform customer, while Waitrose, which is part of the company, was an AWS customer before the decision to combine the company’s IT infrastructure was made. The company therefore uses two of the big cloud providers already.

While he is open to looking at the likes of Alibaba, MacInnes says a company would have to provide something special to be considered.

“It would have to be something that we needed that wasn’t a commodity and provided by someone else,” he told Computer Weekly at Google Next 2019 in London.

“In addition, if you think about the skilling that it takes to run a platform team in an organisation to upscale and train everyone to use – that’s not a thing you want to replicate again and again over multiple suppliers, so there would have to be something really compelling for us to start adding other people into the mix,” he adds.

If other organisations are thinking in the same way, Alibaba has its work cut out – but that doesn’t mean it can’t compete and find other differentiators in the next few years.

However, it should be wary that, as it looks to expand outside of its own country, AWS will be trying to make up ground on Alibaba’s home turf.

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