The well-oiled machine behind the success of this massive retail campaign, Alibaba Cloud, is now a key growth driver for the company, as China’s cloud computing market continues to expand, according to analysts.

Demand for cloud services in the country has been given a boost by the coronavirus pandemic, as consumer use of online services accelerates and more enterprises pursue digital transformation projects.

Alibaba’s cloud services business poised to turn a profit on back of China’s digital economy, global expansion

China’s annual Singles’ Day shopping extravaganza is recognised by Alibaba as the event that has helped raise the bar for the performance of cloud computing in the country.

“Singles’ Day has become a massive social digital innovation project,” said Cheng Li, chief technology officer at Alibaba, on November 11. “I believe the event is the engine of growth for Alibaba Cloud because it set a strict goal for us to create a ‘super cash register’, which frees consumers from waiting online when millions of them are all paying at the same time.”

When thousands of orders started to roll in at the same time on November 11, Alibaba depended on its five major data centres to process trillions of real-time data. These data centres are located in Zhangbei County, in northwestern Hebei province; Ulanqab, a city in south-central Inner Mongolia; Heyuan, a city in southern Guangdong province; Nantong, a city in southeastern Jiangsu province; and Hangzhou, capital of the eastern coastal province of Zhejiang.

Cloud computing enables companies to buy, sell, lease or distribute a range of software and other digital resources as an on-demand service over the internet, just like electricity from a power grid. These resources are managed inside data centres, each of which typically runs tens of thousands of servers.

“The domestic cloud market’s growth during the outbreak was mainly driven by internet enterprises, such as video gaming, live-streaming video, e-commerce, online education and pandemic-related online health care,” said Liu Lihui, senior research manager at IDC China.

In the first half of this year, China’s public cloud computing market reached US$8.4 billion, a 51 per cent increase from a year ago, according to a recent report by research firm IDC.

“For now, more than half of cloud services users in China are companies from the internet industry,” IDC’s Liu said. “We expect demand for cloud resources by traditional industries to be stimulated when these enterprises adopt big data and artificial intelligence applications which need vast data storage and computer processing power.”

Alibaba Cloud expands global reach via two new international partnerships

“From the government’s perspective, cloud computing is a major priority as part of its new infrastructure initiative,” said Matthew Ball, chief analyst at research firm Canalys. “The roll-out of 5G services will be another driver [for cloud computing growth].”

Founded in 2009, Alibaba Cloud has become China’s biggest cloud computing services provider as well as its parent company’s second-largest revenue contributor behind core e-commerce operations. Alibaba’s cloud services revenue reached 14.9 billion yuan (US$2.2 billion) in the quarter ended September 30, up 60 per cent from a year ago, on the back of demand from the internet, finance and retail industries.

About 60 per cent of A-share listed companies on the mainland are customers of Alibaba Cloud as of the end of September, and their average spending that month grew 45 per cent over the same period last year, according to Alibaba.

While the large US cloud companies continue to dominate the global market, Alibaba Cloud and its Chinese peers hold the advantage on the mainland, according to IDC’s Liu

“They cannot dive into the country’s specific scenarios as deep as the Chinese providers,” said Liu, indicating that Azure and AWS have had to form partnerships with Chinese data centre services providers to address local market requirements.