Alibaba scrambles to catch up on global cloud computing demand

Alibaba offices-smallAlibaba Cloud, the cloud computing arm of Alibaba Group, has more than doubled the capacity of its Hong Kong data center as demand for cloud services rises in the Asia Pacific region. With a US$204 billion market value in 2016, up more than 16 percent from the previous year, the global market for cloud services is a growing component of Alibaba’s strategy.

Cloud services are a central component of its primary competitor Amazon’s business, the latter having recently signed a $1 billion contract with social media company Snap.

“Since our entry into Hong Kong in 2014, Alibaba Cloud has become one of the largest public cloud providers in the market in less than two years,” said Ethan Yu, vice president of Alibaba Group and general manager of Alibaba Cloud Global. “More companies have come to realize the importance of changing their traditional IT mind-set to embrace the new data technology.”

Currently China’s largest cloud computing service provider, Alibaba Cloud posted revenue of $254 million in the quarter ended Dec. 31, up 115 percent compared with the same period in 2015. For context, Amazon’s cloud service saw revenue of about $10 billion last year.

One significant impediment to Alibaba’s cloud product is ongoing censorship and restriction of the internet in its largest market, China. Foreign companies are reluctant to store information on Chinese-hosted servers, given the government’s proclivity towards snooping. In addition, the possibility of corporate espionage gives board rooms cold feet.

That said, Alibaba Cloud’s roster of paying customers is on the rise, to 765,000, representing a year-over-year increase of 100 percent. The Chinese company also said that its customers were using, “more complex cloud-computing services such as content delivery networks and database services.”

Alibaba Cloud has operations in 14 global economic centers including mainland China, Singapore and the U.S. Last year, the company launched new data centers in Japan, Germany, the Middle East and Australia.

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