Alibaba in talks with BT for cloud partnership in Europe push

Alibaba Group Holding is in talks with BT Group about a cloud services partnership, as the Chinese internet giant challenges the dominance of Amazon Web Services (AWS) in Europe.

An agreement between Alibaba and the information technology consulting unit of Britain’s former telecommunications monopoly could be similar to Alibaba’s existing arrangement with Vodafone Group in Germany, according to a person familiar with the matter, who asked not to be identified as the talks are private.

A BT spokeswoman confirmed by email that the British telecoms company is in talks with Alibaba Cloud, New York-listed Alibaba’s cloud computing arm, but declined to give details. A spokesman for Alibaba declined to comment.

Alibaba Cloud sets sights on US as it expands services in Europe

Started in 2009, Alibaba Cloud has expanded fast beyond China in a direct challenge to AWS, the cloud computing division of US e-commerce company Amazon. Alibaba Cloud is now the fourth-biggest global provider of cloud infrastructure and related services, behind AWS, Microsoft Corp and Alphabet’s Google, according to a report last month by Synergy Research Group.

Europe has become key to Alibaba Cloud’s success outside China, with prospects in the US made murky by President Donald Trump’s America First agenda. Alibaba has pulled back in the US just as tensions between America and China have escalated under Trump.

Alibaba started the German partnership with Vodafone in 2016. Based in Hangzhou, capital of Zhejiang province in eastern China, Alibaba put its first European data centre in Frankfurt, Germany, allowing Vodafone to resell Alibaba Cloud services such as data storage and analytics.

Alibaba says it is on track to overtake Amazon as world’s top cloud computing services firm

Last week, Alibaba Cloud moved into France, agreeing to work with transport and communications company Bollore in cloud computing, big data and artificial intelligence.

BT’s talks with Alibaba underscore a dilemma for the telecoms industry. As big technology companies and consulting firms muscle in on their business installing and maintaining IT networks for large corporations, they must choose whether to resist them, or accept their help and decide which to ally with.

BT Global Services has struck up partnerships with AWS, Microsoft and Cisco Systems, while Spain’s Telefonica works with AWS. In Germany, while Deutsche Telekom’s T-Systems has partners including China’s Huawei Technologies and Cisco, it has structured its public cloud offering as an alternative to US giants AWS and Google – touting its ability to keep data within Germany where there are strict data-protection laws, 100 per cent out of reach of US authorities.

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A deal with Alibaba could bolster BT’s cloud computing and big data skills as clients shift more of their IT capacity off-site to cut costs.

BT is undertaking a digital overhaul of its Global Services business in a restructuring involving thousands of job cuts after revenue at the division fell 9 per cent last year. The poor performance of Global Services and the ouster last month of BT chief executive Gavin Patterson have fuelled speculation among some analysts that BT may sell the division. Still, the unit is seen by some investors as critical for BT’s relationships with multinational clients.

UK security agencies may scrutinise any partnership between Alibaba, the parent company of the South China Morning Post, and the chief custodian of Britain’s communications infrastructure. Alibaba’s 2016 Vodafone deal required a compliance certificate from Germany’s office for information security.