20 July 2019
Tencent has set up a new business group to integrate its various cloud offerings and solutions. Photo: Reuters
Tencent has set up a new business group to integrate its various cloud offerings and solutions. Photo: Reuters

Why Alibaba and Tencent are reorganizing

China’s internet giant Tencent Holdings (00700.HK) announced recently that it will set up a new business group, Cloud & Smart Industries Group (CSIG), to integrate its cloud offerings and solutions covering retail, education, healthcare, transportation and municipal services.

Said a senior executive of the CSIG unit: “Over the past two to three years, our founder Pony [Ma Huateng] has been far more involved with our business and government clients. We’ve been developing such businesses for quite some time with a low profile. But now we decide to give it a big push.”

Alibaba Group Holding also announced last week that it would upgrade its Alibaba Cloud business unit and rename it Alibaba Cloud Intelligence Group.

The newly formed group will be overseen by Alibaba ‘s chief technology officer Zhang Jianfeng.

It seems that both Alibaba and Tencent are setting their eyes on a new area – industrial internet.

Industrial internet is about how traditional industries can leverage on big data, cloud computing, artificial intelligence and the internet to boost internal efficiency and ability to serve clients. In other words, a deep integration of traditional industries and the internet.

While traditional companies need to think how they can take advantage of new technology to better manage their businesses, internet firms should find out how they can use their skills to help traditional companies as well as public organizations to reform.

The recent organizational changes indicate both Tencent and Alibaba are trying to find the right answers and may have discovered that finding a solution is more complex than they first expected.

Ideally, they can set up a set of customized products. The problem is, industries vary a lot and demand unique solutions. 

The two tech giants may also encounter strong competition from startups formed by people who have both prowess in technology and experience in specific industries.

This article appeared in the Hong Kong Economic Journal on Dec 6

Translation by Julie Zhu

[Chinese version 中文版]

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Venture Partner of Sequoia Capital China, former head of the data committee and vice president at Alibaba Group.

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