Alibaba spinoff moves further into the cloud

A division of the e-commerce giant readies to take on US competition

E-commerce conglomerate Alibaba Group Holding Ltd will extend its cloud-computing services to overseas markets in March, as it attempts to grab a share of the public cloud arena from archrivals such as Amazon.com Inc and Microsoft Corp.

Aliyun, Alibaba's spinoff cloud-computing division, is scheduled to set up data centers outside China to provide cloud-computing services to local enterprises and Chinese companies' overseas operations, the company announced on Tuesday.

By building platforms for companies to manage and store data in the cloud, Aliyun will become the first Chinese company to reach out to the foreign public cloud segment, days after its US counterpart Amazon announced the launch of a similar services in China.

"After five years of development and three years of commercialization, Aliyun is able to provide sustainable services to customers, backed by its resourceful parent, Alibaba," said Aliyun director Zhang Jing.

The service recently gained the world's first gold certification for cloud security from the British Standards Institute, a business standards company, which further guarantees its reliability, Zhang noted.

Zhang declined to disclose the first destination for Aliyun's global outreach. But he implied two options: the United States (Amazon's birthplace) or Southeast Asia, thanks to its proximity to domestic businesses.

As the country's largest cloud-computing platform, Aliyun provides cloud computing services for hundreds of thousands of Chinese websites and e-commerce vendors, banks, game developers and others.

Three-fourths of the 188 million orders generated from the Nov 11 online sales day were processed by the Alibaba cloud-computing system.

Alibaba has made a consistent push into domestic cloud- computing enterprises. In September, Alibaba acquired personal cloud storage service Kanbox.

In August, ChinaSoft International Ltd announced a strategic agreement with Aliyun and the Lishui municipal government for a State-funded cloud project in Zhejiang province.

Aliyun may team up with local telecom carriers to avoid local regulatory restrictions, Zhang noted.

Overall cloud services expenditure, including underlying network and server infrastructure, will surge by 25 percent in 2014, hitting $100 billion globally, according to a report from IT consultancy IDC.

Cloud computing will help companies reduce employment, contracting, acquiring, testing and maintenance costs. Hence, investment in this technology will help companies save money in the long run, said Paul Dean, a technology analyst at global consultancy firm Accenture China.

Small and medium-sized enterprises are the ideal candidates for cloud services, as they enable companies to make flexible IT input in the most cost-effective manner, said Dean.

Foreign vendors are eyeing the exponential potential of the market. Amazon announced earlier this month that it had formed partnerships with the governments of Beijing and Ningxia Hui autonomous region to develop cloud-computing services.

Under the initiative, China-based and multinational companies will be invited to begin using Amazon services to build their businesses and run their applications in the cloud.

Andy Jassy, senior vice-president of Amazon Web Services, said its customer base, thousands of which are Chinese customers that use the company's cloud computing service outside China, is already considerable.

Microsoft introduced its public cloud-computing services, Windows Azure, in China in June.

Since its debut, Windows Azure has drawn more than 1,000 corporate users that make designs and applications on the platform, said Xie Enwei, chief cloud officer at Microsoft's China operations.

As the first multinational corporation to bring public cloud services into China, Microsoft has adjusted to China's regulations on privacy protection, so that data being processed or generated by Chinese customers on the platform will remain inside China.

"Azure's year-on-year growth has jumped to 150 percent since its debut three years ago. We are quite optimistic about its future,and, notably, the Chinese market," Xie said.

The future landscape will be the convergence of the private cloud and the public cloud, as well as the hybrid model, where the cloud coexists with the companies' current IT infrastructure, said Dean.

Cloud computing may create 5 million job opportunities and more than 2.2 trillion yuan ($362.3 billion) in output value across different industries in the next three years, according to CCWResearch, an IT think tank in China.