Three-year spending plan spurred by COVID-19 pandemic
The Lowdown: Company officials said over the weekend that Alibaba will spend the money over three years to address the fast-growing demand for cloud services that only has accelerated as the coronavirus has spread worldwide.
The Details: Alibaba will invest the money in its cloud infrastructure – not only in the systems themselves but also in the processors that power them and the operating systems that run on them. The company already was the top cloud provider in China and among the top players globally, but Jeff Zhang, president of Alibaba Cloud Intelligence and CTO of Alibaba Group, said in a statement this week that the coronavirus crisis was a key driver behind the investment.
Alibaba’s technology includes its Apsara distributed OS, Hanguang 800 artificial intelligence (AI) processor for inference, and X-Dragon Architecture, now in its third generation.
Zhang said that the “COVID-19 pandemic has posed additional stress on the overall economy across sectors, but it also steers us to put more focus on the digital economy.”
The Impact: According to Synergy Research Group, Alibaba is the top cloud provider in China and the second-largest in the Asia-Pacific region behind Amazon Web Services (AWS). The company has more than 60 availability zones in 21 regions around the world, including the United States and Europe.
As it looks to expand its presence worldwide, it will come into closer competition with the top two cloud providers, AWS and Microsoft Azure, which together own about half the global market. However, according to Synergy, Google Cloud, Alibaba, and Tencent – another Chinese company – are gaining market share and saw revenue increases of more than 50% year-over-year in the fourth quarter of 2019.
Background: The company’s cloud business revenue jumped 62% in the quarter ending December 2019 and its cloud revenue had already reached $1.53 billion for the quarter in February.
The Buzz: “By increasing our investment in cloud infrastructure and fundamental technologies, we hope to continue providing world-class, trusted computing resources to help businesses speed up the recovery process and offer cloud-based intelligent solutions to support their digital transformation in the post-pandemic world,” Zhang said.