Alibaba Cloud pledges $1B to boost overseas alliance

Alibaba is known for its sprawling e-commerce empire, but like Amazon, the cloud service has been a big driver of its revenue in recent years.

The Chinese cloud giant is poised to double its overseas reach and today announced a $1 billion investment in a “global partner ecosystem upgrade.” Alibaba Cloud is now the third largest public cloud provider in the world, an achievement inseparable from the vast network of local allies it has built around the world.

The company is constantly recruiting local partners to handle tasks such as sales, technical support and customer service. The $1 billion initiative is designed to “support the partners’ technological innovation and their market expansion with Alibaba Cloud over the next three fiscal years,” the company said. The money will come in the form of both financial and non-financial incentives, including funding, rebates and go-to-market initiatives.

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Alibaba Cloud currently has around 11,000 partners worldwide, including Salesforce, VMware, Fortinet, IBM and Neo4j.

According to market research firm Gartner, Alibaba Cloud had a 9.5% market share in 2021, behind Microsoft (21%) and Amazon (39%).

Based in Hangzhou and with a growing presence around the world, the cloud service has become the cloud solution of choice for many Chinese companies expanding overseas. But rising national security tensions between China and the West have driven some customers away from its cloud platform. To win over US regulators, TikTok has reportedly exited the Alibaba Cloud and moved all of its US data to Oracle servers.

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Even young Chinese companies are joining the technological bifurcation. In recent months, several consumer-facing internet startups, including a social network and a productivity tool, have told me that they have been storing all of their offshore user data in foreign cloud services, only to later avoid regulatory scrutiny.

Alibaba Cloud has recently suffered from slowing growth and the loss of a key cloud client speculated by industry watchers to be ByteDance. As the company noted in its June earnings report:

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Our cloud segment’s annual revenue growth reflected the rebounding growth of the overall non-internet industries, driven by financial services, public services and the telecoms industry, partially offset by the decline in revenue from the leading internet customer, which has phased out our overseas cloud services for its international business due to non-product requirements, online education customers as well as slowing demand from other customers in China’s internet industry.

Western tech companies face the same decoupling pressures in China. The country’s data law prohibits user data from leaving its borders, so companies like Apple and Tesla have long stored Chinese user data in domestic cloud centers.

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