Alibaba commits US$1 billion on global cloud services partner ecosystem to expand overseas amid China’s faltering economy

The investment will consist of both financial and non-financial incentives, such as funding, rebates and go-to-market initiatives
Alibaba Cloud currently works with about 11,000 partners worldwide, including resellers, consulting firms and major US tech firms like Salesforce

Alibaba

Tracy Quin Shanghai

Published: 6:30pm, 22 Sep 2022

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Alibaba Cloud, which runs the digital technology and intelligence backbone of Alibaba Group Holding, has committed a US$1 billion investment to upgrade its global partner ecosystem, as China’s faltering economy prompts the company to ratchet up its international expansion.

That investment, according to Alibaba, will consist of both financial and non-financial incentives, such as funding, rebates and go-to-market initiatives, to support partners’ technology innovation and market expansion during the company’s three financial years, which started from April. Hangzhou-based Alibaba owns the South China Morning Post.

“Partners have always been a key focus for Alibaba Cloud, and we are committed to providing them with strong support … both technologically and commercially,” Selina Yuan, Alibaba Cloud Intelligence International president, said in her keynote speech on Thursday to announce the investment at the 2022 Alibaba Cloud Summit held in Phuket, Thailand.

The revamped strategy bodes well for Alibaba Cloud, as it competes against large providers like Amazon Web Services (AWS), Microsoft Azure and Google Cloud overseas. Alibaba Cloud was the world’s third-largest infrastructure-as-a-service provider by revenue in 2021 and 2020, behind AWS and Microsoft Azure, according to data from tech research firm Gartner.

Racks of servers at a data centre run by Alibaba Cloud, the cloud computing subsidiary of e-commerce giant Alibaba Group Holding. Photo: Handout

Cloud computing services enable 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.

Alibaba Cloud currently works with about 11,000 partners worldwide, including resellers, consulting firms, and major US tech firms such as Salesforce, VMware, Fortinet and IBM.

In June, Alibaba Cloud ramped up its international business development efforts with two major initiatives. It introduced software-as-a-service tool Energy Expert to help its enterprise customers around the world manage their carbon emissions and launched two new data centres in Saudi Arabia.

On the mainland, Alibaba Cloud had a leading 34 per cent share of the US$7.3 billion domestic cloud infrastructure market in the second quarter, according to data from independent analyst firm Canalys. Ranked behind it in the same period were the cloud services units of Huawei Technologies Co and Tencent Holdings.

The Alibaba Cloud mobile app icon is displayed on a smartphone screen, alongside those of rivals Amazon Web Services and Google Cloud. Photo: Shutterstock

Alibaba Cloud’s sharpened focus on international markets comes at a time when weakened consumption and economic headwinds in China have dampened parent Alibaba’s profitability.

In the June quarter, Alibaba’s net income fell 50 per cent to 22.74 billion yuan (US$3.4 billion), down from 45.15 billion yuan a year earlier. Revenue was flat at 205.55 billion yuan.

But revenue from cloud services rose 10 per cent to 17.68 billion yuan, driven by demand from enterprises in the financial services, public services and telecommunications industries.

Alibaba net income halves, revenue flat amid economic headwinds

Still, there could be more challenges ahead for Alibaba Cloud and its mainland peers.

The US government recently banned Nvidia Corp and Advanced Micro Devices from selling their graphics processing units (GPUs) – chips used for artificial intelligence and high-performance computing work – to China. The country’s cloud computing services providers are expected to be affected by this new trade restriction because those GPUs have also been deployed in their data centres, according to industry insiders cited in a Post report last week.

At its three-day summit in Thailand, Alibaba Cloud signed nearly 30 agreements to help customers and partners accelerate their digital innovation capabilities with leading cloud computing technologies.

A number of new products were also released, including Cloud Enterprise Network 2.0, which provides ultra-large-scale networking capabilities to support enterprises’ global expansion.

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