Cloud services in China set to double in size

Study finds Alibaba Group's growing reach a driving factor behind the booming industry

PUBLISHED : Tuesday, 20 October, 2015, 11:43pm
UPDATED : Tuesday, 20 October, 2015, 11:43pm

The enterprise public cloud services market in China is poised for rapid growth in the next five years, driven by strong demand from small businesses and the extensive reach of e-commerce giant Alibaba.

A new study by Forrester Research predicts the domestic market will expand to US$3.8 billion by 2020, more than double its estimated size of US$1.8 billion this year.

Alibaba Cloud Computing (AliCloud), the subsidiary of Alibaba formerly known as Aliyun, has the broadest range of public cloud services and alliances among mainland service providers, according to Forrester analyst Charlie Dai, the lead author of the study.

"Alibaba's extensive partner ecosystem ... aims at both the Chinese and global [cloud] markets," Dai said.

At the end of June, AliCloud had 1.8 million subscribers, which included state-owned enterprises, large domestic companies, and small and medium-sized enterprises (SMEs). Founded in 2009, AliCloud operates the network that powers parent Alibaba's e-commerce business.

Cloud computing enables companies to buy, sell, lease or distribute online a range of software and other digital resources as an on-demand service, just like electricity from a power grid. These resources are kept and managed inside data centres.

Earlier this month, AliCloud launched its second data centre in California's Silicon Valley. That followed last month's opening of a new facility near Qiandao Lake in Zhejiang province, another one in Singapore in August and its first US data centre in March.

"Our data centres are typically located in key innovation and commerce hubs around the world, where we expect growing demand for cost-efficient cloud computing and big-data analytics services," AliCloud vice-president Ethan Yu Sicheng said earlier this month.

AliCloud also operates data centres in Beijing, Shanghai, Hangzhou, Shenzhen and Hong Kong. In May, Alibaba announced a joint venture with diversified holding company Meraas that will develop a data centre in Dubai.

Dai said more Chinese firms "are developing digital customer experiences that require scalable, on-demand resources". He cited as an example Hong Kong-listed China Merchants Bank. "China Merchants Bank uses public cloud to support ... its mobile business applications when its internal data centre cannot support explosive traffic growth," he said.

SMEs, which make up 98 per cent of all businesses in China, are also looking to lower their initial technology investments, according to Forrester.

While global cloud services players Microsoft and Amazon Web Services continue to grow their operations on the mainland, Forrester found that competition from domestic providers other than AliCloud has helped heat up the market.

Those include Tencent's SME-focused QCloud, Anchora MoPaas (mobile platform-as-a-service), ChinaC, e-commerce player JD.com's JCloud, and start-ups QingCloud, DaoCloud, UCloud and UnitedStack.