In the U.S., there's a lot of discussion about whether Microsoft and Google will eventually catch Amazon Web Services (AWS) in the cloud market. But some experts predict it will be an outsider, namely China-based Alibaba, that will soon battle AWS for U.S. cloud dominance.

Alibaba Group Holding Limited is one of the world's largest e-commerce retailers and also boasts a robust worldwide cloud operation. The company has seen rapid expansion that mirrors Amazon in the U.S.

So far, Alibaba has focused primarily on China and parts of Europe. But recently, the company has made moves that indicate it has broader global ambitions.

Making moves

In July 2015, Alibaba announced it would invest $1 billion into its Aliyun cloud computing arm to challenge AWS. Since then, Since then, Alibaba has set up Aliyun data centers in Japan, Europe, Singapore and the Middle East.

Alibaba's plan is to overtake Amazon by 2019, whether that's in customers, technology or scale, according to Simon Hu, the president of Aliyun, in a 2015 interview with Reuters. "Amazon, Microsoft and others have already laid the groundwork for us by educating the markets about cloud in the U.S. and Europe, so we have an even better opportunity to join in the competition."

Since then, Alibaba has made progress. As of Q2 2017 year-over-year growth, AWS grew 42%, Microsoft grew 97% and Google grew 92%, according to figures from Canalys. While the U.S. cloud giants' rates of growth are impressive, Alibaba's cloud has boasted triple digit year-over-year growth for eight consecutive quarters. The company reports its earnings for the second quarter of 2017 on August 10. 

According to Gartner's latest Magic Quadrant report released in June, Alibaba ranks particularly well in the "visionaries" quadrant. But Gartner also noted Alibaba Cloud services has some limitations, primarily that it is unproven outside of the Chinese market.

"There is a lot of attention around Alibaba now because their global expansion plan is so aggressive," said Agatha Poon, research director for APAC Services at 451 Research. "But at least for now, there is no immediate threat to the major U.S. hyperscale cloud providers."

That's because Alibaba's expansion plan is tied to helping Chinese businesses expand outside of China, according to Poon. 

"Alibaba wants to bring their customers to different countries and different parts of the world, so their expansion is viewed [as] an opportunity for Chinese companies, not just for Alibaba," said Poon.

"Their go-to-market in Europe recognizes that brand recognition is still fairly low, so they're initially targeting Chinese companies looking to expand to Europe," said Paul Miller, senior analyst at Forrester. "This strategy does make some sense, as they can build scale, credibility and visibility by initially working with customers that already know and understand them from China."

But that's not a strategy ambitious Alibaba will likely maintain forever. While starting with expanding Chinese companies might make sense for now, Miller says that strategy will only get it so far.

"To truly scale, they do need to start appealing to non-Chinese customers," said Miller. "And there, they will find themselves in direct competition for mindshare with the existing hyperscale cloud providers."

Not about the tech

Though largely untested outside of the Chinese market, experts say Alibaba's technology is on par with U.S. cloud providers.

"Alibaba's cloud is certainly credible and technologically capable," said Miller. "Superficially, it demonstrates a lot of similarities to AWS."

Alibaba also appears competitive on price, and is beginning to demonstrate some differentiation in areas like AI and machine learning. "If it can keep that up, there may be features there that are sufficiently compelling to attract new customers," said Miller.

But according to Poon, working its way into the U.S. market will be about more than technology and cost.

"It’s about how to understand customer requirements in different geographies," said Poon. "If they want to get into the U.S. enterprise market, they need real operational experience, especially around understanding enterprise requirements in the U.S. Companies in the U.S. want to see experience and the skill set to understand their needs. I don’t think they have that right now."

Alibaba is slowly working to rectify that by partnering with U.S. companies to start to understand what it looks like to serve U.S. customers. Alibaba already has a data center presence in the U.S., with two data centers in the Silicon Valley area and one in Virginia. In January 2016, Alibaba announced it would work with U.S.-based Nvidia Corp. on cloud computing, deep-learning and high-performance computing initiatives.

But at least for now, Poon predicts Alibaba will likely continue to follow customer demand when it comes to geography. In other words, wherever the Chinese companies want to go, Alibaba will follow. In the future, however, it could be another story.

Miller also notes that Alibaba is not the only Chinese company with aspirations in the U.S. Another big Chinese player — Huawei — is taking a different approach, and their strategy may be worth watching as well.

"Instead of launching Huawei-branded clouds in Europe, they are partnering with local telecom providers," said Miller. "Huawei, of course, already has a strong relationship with telcos like these, having provided them with telecoms networking hardware for years. But both of these providers have ambitions to grow their footprint outside their domestic market, with new data centers or new partners planned for most major geographies."