Alibaba lays down gauntlet to other cloud providers with $28bn investment

Following the recent news that Alibaba Cloud plans to invest $28bn in its infrastructure over the next three years;

Luke Gowland, Analyst at GlobalData, a leading data and analytics company, offers his view:

“This unprecedented investment pledged by Alibaba is a clear message to its rivals that the company is serious about competing with the likes of Amazon Web Services (AWS), Microsoft Azure, and Google Cloud on a global scale. Alibaba will focus the investment on technologies such as operating systems, servers, chips and networking to create next-generation data centres.

“The $28bn sum will send shockwaves to AWS and Microsoft Azure who would be foolish to rely on their current market dominance to see off the threat from Alibaba. Both companies will need to respond with similarly impressive figures to maintain their positions as the two leading cloud vendors in the global Infrastructure-as-a-Service (IaaS) market.

“Cloud revenues for Alibaba currently stand at 7% of its total revenue and are growing at 67% per year. Alibaba will no doubt expect this eye-watering figure to stimulate significant growth in its cloud revenues, not only in Asia but worldwide, as the company helps businesses undergo their digital transformation in a post-COVID-19 environment.

“Cloud vendors have emerged as beneficiaries of COVID-19, playing a pivotal role to support businesses operating throughout the pandemic. Demand for SaaS collaboration tools and IaaS processing power and storage capacity has risen while employees are working from home.

“Alibaba has been facing tough competition from Tencent, which grew its share of the Chinese cloud market to 18% in the fourth quarter of 2019. This investment will cement Alibaba’s leading position in the Asian cloud market. It is unlikely that Alibaba’s competitors, such as Tencent and Baidu, will be able to respond with similarly radical figures and dedicate half their overall revenues to their cloud business.”

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