27 February 2020

Scramble on as tech players look for cloud cover in China

The booming business of cloud computing services was one of the few bright spots in IBM’s latest quarterly report, growing at a stunning 69 percent year on year in sharp contrast to sluggish sales elsewhere in the corporate empire. The cloud business brought in US$4 billion, or 15 percent of IBM’s fourth-quarter revenue.

IBM focuses on corporate clients, offering storage, databases and integration through online cloud servers for companies that don’t want to manage those systems themselves. If, for example, a company does not want to invest in a lot of software, they can order it and use it through IBM’s cloud system. 

The future of cloud computing is also looking bright in China, where the economy has been growing at just under 8 percent. With strong consumer demand and Beijing’s blessing, e-commerce and telecommunications have been growing at a brisk pace.

And that’s what’s helped make Aliyun, one of Alibaba’s core business units, the lead player. The company offers services to hundreds of thousands of Chinese websites, e-commerce vendors, banks and game developers, among others, making it the country’s biggest cloud computing platform, according to mainland media.

Aliyun handled three-quarters of the 188 million orders generated from the Nov. 11 online shopping festival last year. Not content with that success, the group announced last month that it will venture overseas in March to become the first Chinese company to offer cloud services to the public in other parts of the world.

Overseas players are seeing potential, too, and are muscling in on the mainland. IBM has expanded its presence in China, and a week before Alibaba announced its plan to go abroad, US-based Amazon made a splash by saying that it is expanding its Amazon Web Services in China. AWS already counts “thousands” of Chinese companies, including handset maker Xiaomi, Qihoo 360 Technology and TCL Corp, as clients, according to Xinhua. Sensing the threat, Alibaba said it will cut the price of its services by up to 35 percent.

But, apart from Aliyun, Chinese firms will struggle to compete with the offerings of overseas giants, Evan Zeng, an analyst at tech research firm Gartner, told Xinhua. Zeng said multinationals like IBM and Amazon can offer a more stable and transparent system, but most Chinese cloud vendors can only extend such services to small companies.

Other internet titans like Baidu and Tencent (00700.HK) are still quite green in the cloud computing world. They have launched their own services in the last year or so, aiming them, at least for now, at the public.

The landscape of Chinese cloud computing is still evolving and local providers are still finding their way. Alibaba leads the pack for now but there’s no guarantee it will be ahead in a few years.

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EJ Insight writer