Alibaba bets big on cloud expansion to drive global growth

With a mission to serve two billion consumers in the next 20 years, e-commerce giant Alibaba Group has set the course for the rapid global expansion of its cloud computing business on the back of the record number of transactions that it processed during Singles’ Day this year.

Alibaba Cloud, known on the mainland as Aliyun, processed a record 175,000 orders per second, without incident, at the peak of the group’s 24-hour 11.11 online shopping festival last Friday, and cross-border transactions were completed for 235 countries and territories.

“Alibaba Group has advanced from being an e-commerce company to a global technology leader, enabling us to power the future of retail through ... big data, cloud computing, artificial intelligence, augmented reality and virtual reality,” Alibaba chief technology officer Jeff Zhang Jianfeng said on Sunday.

An Alibaba Cloud spokesman said the company was on track to open new infrastructure in Dubai, Japan and Australia, as well as in Europe, by the end of this year.

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. “Cloud” refers to the internet as depicted in computer network diagrams.

Philbert Shih, the managing director at Toronto-based Structure Research, told the South China Morning Post that Alibaba Cloud is leasing data centre facilities overseas.

“This makes perfect sense as it will help the company avoid significant logistical and operational challenges, allowing Alibaba to funnel resources to innovation and design – areas where the true differentiation takes place,” Shih said.

Hangzhou-based Alibaba Cloud was founded in 2009, to run the network that powers parent Alibaba’s online and mobile e-commerce businesses, and support the merchants on those platforms.

It has since become mainland China’s largest cloud infrastructure services provider, with more than 2.3 million customers worldwide as of September 30, including 651,000 paying clients.

“The strength of the Alibaba Cloud infrastructure is most obvious in payment transactions,” Alicia Yap, the head of regional internet research at Citi Research, told the Post, which is owned by Alibaba.

“If their cloud infrastructure couldn’t handle the large amounts of transactions, then the [Alipay] payment mechanism would collapse.”

Alibaba Cloud credited its own “Apsara super computational engine” for ensuring that networks and systems were scaled to handle “unprecedented volumes and efficiently match buyers and sellers worldwide”.

Alipay processed more than 1 billion payment transactions in total last Friday, with 120,000 transactions per second processed at peak.

Logistics data unit Cainiao Network processed more than 657 million delivery orders placed on Alibaba’s online retail marketplaces on the same day.

He Yunfei, the senior product manager at Alibaba Cloud, said “cloud computing and data technologies are the twin engines powering the future global economy”.

Alibaba Cloud, which had revenue of 1.49 billion yuan (HK$1.69 billion) in the quarter to September 30, is forecast to record nearly US$9 billion revenue by 2020, closing the gap on global industry leader Amazon Web Services, and becoming a key growth driver for its parent, according to a Morgan Stanley research note in June.