Select Page

I will be honest with you. Attending the Flash Memory Summit (held at the Santa Clara Convention Center on August 5-7) was really for the purpose of connecting with Ben Woo (technically my boss). Since we live on different coasts, having that face-to-face time is extremely valuable. Ben is the storage guy, so this summit is geared towards people like him.

That did not mean that I did not get something out of the Summit. I had a chance to listen to a company that is gearing toward one of the most anticipated IPOs – Alibaba. (Kudos to Lance Levanthal and his crew for scoring a keynote from the company.)

I have always known Alibaba as a valuable asset of Yahoo!, especially now as Yahoo! struggles to grow its revenue. I was aware that they were in e-commerce. That actually is an understatement. According to BusinessWeek, Alibaba sold $248B worth of merchandise in 2013. AMZN sold half of that value, while eBay sold a third. Alibaba has provided Chinese manufacturers with a channel to sells its goods worldwide. More importantly, this company has facilitated lots of business transactions in and out of China without having to deal with language or cultural differences. One can say that Alibaba is a poster child for the globalization of business.

Now Alibaba is looking to the cloud for further growth – its own cloud. Just like AMZN, Alibaba formed its own cloud service in 2009, Aliyun.com, stemming from its own platform that supports Alibaba’s e-commerce business. For now, Alibaba is focused on serving the burgeoning Chinese cloud market while competing against Baidu and Tencent.

By all accounts, Alibaba has enough business to capture in mainland China. However, with its upcoming IPO on the NYSE, who is to say that Alibaba will not become a contender in the US cloud market?

The company definitely has set its sights on the Western market. I did some research (as if that is a surprise given my title) and found out that it is heavily investing in US startups – Lyft, Quixey.com (a mobile search engine for apps), Tango. Alibaba currently is negotiating an investment into Snapchat.

I maintain that the “cloud services market” is one of those markets in which any cloud provider can focus primarily on growth, less on market share. (I strongly believe that the market remains in the early adoption phase.) Notably, one exception is Rackspace, which announced earlier this week that it will bow out of the IaaS market. And the likes of AMZN and GOOG are far ahead in terms of reach and performance, so Aliyun.com cannot legitimately vie for Western customers now. Nevertheless, as more Chinese businesses adopt the cloud, Alibaba will need to increase its footprint and performance to successfully manage a growing customer base, as China can definitely offer.

How could Alibaba start acquiring Western customers? Alibaba could serve Chinese locations of US-based companies. US companies that have struggled to develop a presence in China could now more easily do so by using Alibaba’s cloud. Companies could use Alibaba as a disaster recovery site. Is there any rule stating that one company should only have one cloud provider?

You may be thinking the following:
• “No Western company would even dare to have its information stored in China. The government will use Alibaba to spy on companies.”
• “Alibaba uses cheap equipment. Their cloud service will never be good enough for Western customers.”
• “AMZN, GOOG, MSFT, possibly IBM and HP, will always have such a lead that no Western company will ever consider Alibaba as a worthy alternative.”
• “You’re nuts!”

And so on and so forth…

But then again, US companies strongly embraced outsourcing software development and customer services to places such as India and Eastern Europe. “Stranger things” have happened.

Right now, any US cloud provider need not be concerned about Aliyun.com. Yet, once Alibaba goes IPO, the company will receive lots of attention. We will not see any immediate changes in the cloud competitive landscape. But make no mistake…Alibaba will make inroads with Aliyun.com in the Western market, if not by its own platform, perhaps some partnership down the road.

Yes, I’m hearing it…you’re nuts! But stranger things have happened….

Share