By Han Lei
On China’s Singles Day shopping festival, tech giant Alibaba announced that it made a new sales record of RMB 120.7 billion (USD 17.8 B). That is almost 4 times more than the USD 4.47 billion Black Friday revenue in America last year. However, many said that this high number might be a ceiling for Alibaba’s e-commerce revenue in the future.
Here’s a solution for Alibaba: cloud computing. Jack Ma said that cloud computing is the next big thing for Alibaba. It could be a beautiful utopia garden for AliCloud, Alibaba’s cloud operation. So will it succeed?
My answer is “no”, or at least, not for now.
Why? Let us see a simple definition of Cloud Computing from Wikipedia: “Cloud computing is a type of internet-based computing that provides shared computer processing resources and data to computers and other devices on demand.” In fact, e-commerce business is only a small part of the cloud computing concept.
In September 2009, Jack Ma and his team built up the Alibaba Cloud Computing project, also known as AliCloud. Their idea is to provide optimized business strategies and solutions for small and mid-size companies (SMEs). However, until now, AliCloud has only 2,300,000 customers globally, according to AliCloud’s official data.
Looking at the whole of China, how many SMEs are there? Industrial experts estimated about 40 million SMEs. In that sense, the size of 2,300,000 customers globally is far too small for an ambitious company like Alibaba who wants dominate in cloud computing.
These days, when a customer asks for a cloud computing solution, they will most of the time go to Amazon AWS, Google+, Microsoft Azure or other global brands. Who could turn to AliCloud, even in China?
I’d like to suggest three perspectives of solution to help AliCloud build up an imperial kingdom over the next five or 10 years.
The China Base Strategy
Jack Ma’s Alibaba e-commerce business is the largest in China, and ranks top 3 in the world. The AliCloud team should use these strong resources to expand their marketing, not only focusing on shopping but also in developing many more fields. AliCloud should have faith in their own abilities to influence the way that Chinese people run companies, and use that to their advantage.
As part of this, Alibaba should educate on the benefits of using cloud computing. For example, by using AliCloud, a company can save money on up-front infrastructure costs and therefore can easily have its own domain and business platform.
Technical Innovation R&D
For building up the company’s long-term strength, Alibaba needs to put a huge amount of money into innovation R&D. It needs to support and work with universities in China to train up new blood to be the next professionals to join its ranks.
This is just like what Microsoft, Google, Amazon, IBM and Intel have been doing for years: they have already supported and worked with over thousands of universities in North America.
And why are technical innovation R&D so important? Let’s look at the following example. In the report that Alibaba sent to the SEC during its IPO in 2014, Alibaba said that AliCloud could process 60,000 transactions per second. In 2015, it could process 140,000 transactions per second. This is obviously a great improvement, but Amazon AWS, a major rival of AliCloud, could process 150,000 transactions per second even back in 2014. In 2015, it could process 3,440,000 transactions per second, according to a CNN report. Looking at these numbers, it’s clear that AliCloud needs to put in more money, and give more time, to fill up the gap.
Forget North America. Look at Northern Europe and Africa
As much of the cloud computing market in North America has been taken by Microsoft, Google and Amazon, AliCloud should aim more at Northern Europe and Africa, rather than putting huge amounts of money to compete with those companies in North America.
Two big Chinese telecom companies, Huawei and ZTE, have already built and developed markets in those two regions, AliCloud could work together with Huawei and ZTE to expand its marketing toward faster and efficient cloud computing. More shared marketing means more customers and business for Alibaba.
Follow my recipe, and AliCloud might have a shot to build its empire in time.
(Top photo from Baidu Images)