Can Alibaba challenge Amazon’s cloud dominance?

Amazon’s dominance as the world’s largest public cloud vendor has faced growing competition from the likes of Google and Microsoft in recent years, but it may be the emergence of Chinese web giant Alibaba that poses the biggest threat yet to Amazon Web Services.

In November, Alibaba revealed it would be opening a new data centre in Germany, in line with its strategy announced in 2015 to expand its cloud services arm globally. The move follows recent data centre expansions in places like Australia, the Middle East, and even Amazon’s backyard, the US.

If Alibaba is to challenge Amazon, it has a lot of catching up to do. In the last quarter, AWS reported revenue of $3.2 billion. This represented a 55 percent leap, year-on-year, and put its annual revenue at around $13 billion.

Alibaba may be a long way off this level of income, but it is growing at a much faster rate. Its cloud computing unit, called Aliyun, reported quarterly revenue in November of $224 million—a 130 percent increase from the previous year.

Even before Alibaba announced its plans for European expansion, Goldman Sachs predicted that Alibaba’s cloud computing business is on track to be the biggest competitor to AWS by 2019.

In a note sent to investors in August, Goldman Sachs predicted Aliyun would have an enterprise value of $42 billion, putting it ahead of Google, Microsoft and all other current rivals to AWS. “At these values, [AWS and Alibaba] would be the two largest infrastructure technology companies in the world,” the note said.

Alibaba, often referred to as the Amazon of China, has deep enough pockets to be able to undercut Amazon and other cloud players in Europe and elsewhere in order to establish a significant presence, but it remains to be seen whether it can compete with Amazon’s own aggressive pricing strategy. Whatever the case, you can expect 2017 to be the year the battle between the two online retail giants reaches the cloud.

Image: Alibaba

Image: Alibaba
Image: Alibaba

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