Alibaba – the Chinese ecommerce giant – is expanding its IaaS cloud offering named Aliyun into the United States and in doing so will take on America’s largest ecommerce company, Amazon and its cloud computing division Amazon Web Services.
Alibaba and Amazon each dominate their countries ecommerce markets, and they both lead the IaaS markets in their respective nations as well. Now, each company is looking to move on to each others’ home turf.
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Alibaba has embarked on a grand expansion of Aliyun, including opening a data center in Silicon Valley last year and partnerships with US hosting providers and chip makers in recent weeks.
Meanwhile Amazon, along with competitor Microsoft, has pushed into the Chinese cloud market too. But U.S. companies are finding it difficult to offer services directly to Chinese customers because of legal regulations in the country.
All these dynamics mean that the international IaaS cloud battle is on.
Aliyun – the Chinese cloud
Alibaba Group is a holding company started in 1999 by executive chairman Jack Ma that has grown to be arguably the largest ecommerce company in the world, according to the Wall Street Journal. It had the largest initial public offering in history last year and has companies across a variety of industries – including wholesale and commercial trade, as well as finance and marketing divisions. In 2009 Alibaba started Aliyun, a cloud computing service to meet the needs of the company’s digital business.
Today Aliyun operates in six regions of the world, including five in China and its most recent location in Silicon Valley. A seventh region is under construction in Dubai. Alibaba says it has 1.4 million customers; its fourth annual developer conference last year attracted 10,000 attendees and in the fourth quarter of last year Aliyun had revenues of $147 million.
Forrester cloud analyst Frank Liu, who is based in China, agrees with the company’s projection that it is the market leader in China’s public cloud market. The company offers a range of IaaS cloud services including elastic compute, storage databases, content delivery, security and analytics products. Aliyun hosts Alipay, the company’s payment arm and in November 2014 it managed record traffic for a Chinese shopping event named 11.11 in which it processed a peak of 80,000 transactions for Alibaba per second.
Aliyun comes to America
In recent months Alibaba has made a concerted effort to expand Aliyun into the U.S. But analysts who track this company say the moves, at least initially, are not aimed directly at taking on AWS and other major U.S. IaaS vendors like Microsoft and Google. “Aliyun has global ambitions just like other Chinese Internet giants,” says IDC analyst Melanie Posey. “They want a foothold in the U.S. to serve other Chinese companies with global ambitions (and those of their parent company) – and to be global, you need to have presence in the US.”
Alibaba is aiming Aliyun at Chinese companies who are looking to make inroads into the U.S. market. Conversely, companies in the U.S. that are looking to expand into China may find Aliyun an attractive option as well, says Liu, the Forrester analyst. “No doubt Aliyun will face intense competition in the global market, but a China-centric customer base (going global) will probably grow to be a nice niche with which it can dominate over time as China's enormous economy continues to expand,” Liu wrote in an email.
Aliyun still has some work to do to build up its offering in America though. In China Aliyun has almost two-dozen features, but its offering in Silicon Valley is relatively bare bones with elastic compute, storage, load balancing and a relational database. More advanced features like Aliyun’s unique cluster compute engine are not yet available outside China.
Alibaba isn’t just opening data centers in the U.S., it’s partnering with domestic vendors as well. Equinix is a collocation hosting provider, meaning it provides data center space for organizations that then fully manage the technical hardware inside of it. The big advantage to using Equinix is that it has direct connections between its collocation facilities and most major IaaS cloud providers, including AWS, Azure and now Aliyun too, thanks to a new partnership announced last week.
Alibaba is looking to make other partnerships as well: This week the company announced the Marketplace Alliance Program with Intel, which will allow partners to construct infrastructure offerings that are compatible with Aliyun.
And the international expansion plans go far beyond just the shores of the U.S.: Liu says next on Aliyun’s list are to open sites in Germany, Singapore and Japan.
Two can play this game
Amazon isn’t sitting idly by. AWS has more than 1 million customers in 190 countries and data center regions in North and South America, Europe and Asia/Pacific. In 2013 it announced plans to expand into Beijing. The service began in early 2014 but today it remains in a limited preview. AWS says a “select group” of Chinese-based organizations and multi-national companies with customers in China have been invited to use the service.
AWS says in order to comply with Chinese laws and regulations it uses a “multi-partner” approach to offering cloud services in China. Providers such as ChinaNetCenter and SINNET provide infrastructure, bandwidth and networking capabilities that run the AWS software. Because of complications in operating a Chinese data center the Beijing region has a limited product offering compared to AWS’s other regions around the world. It requires users to set up separate credentials compared to all of AWS’s other regions too. AWS declined to comment on Alibaba’s expansion into the U.S. cloud market.
Similarly, Microsoft has Azure in China through a partnership with 21Vianet, which operates and sells the Azure cloud service in the country.
Given the lack of full support that AWS and Microsoft are able to directly offer to customers in China, that could make Aliyun’s cloud platform a more attractive option to businesses looking to gain an international footprint in the Chinese market.
The cloud battle has gone global.