Dive Brief:
- Political tensions and disappointing returns on U.S. cloud investment have pushed Chinese technology giant Alibaba to hedge its cloud expansion in the U.S., according to a report from The Information on Friday.
- Instead of looking to pull customers from Amazon Web Services, Microsoft Azure and Google Cloud Platform, Alibaba will focus on multinational companies in the U.S. with cloud services needs in China, according to the report.
- Alibaba started making moves in the U.S. cloud market in 2015, but the move back could limit the company's ability to advance in markets outside of the APAC regions. Alibaba Cloud President Simon Hu had predicted back in 2015 that Alibaba could meet or surpass AWS dominance in the global cloud market by next year, according to The Information.
Dive Insight:
AWS is the public cloud leader in every global region; Azure and GCP hold spots No. 2 and No. 3, respectively, in every region except APAC, where Alibaba holds a strong second place.
Alibaba, Microsoft and Google are demonstrating cloud revenue growth rates far above the market rate, but countering the Amazonian giant is a difficult tasks. Analysts estimate anywhere from 40% to 50% of the global market is owned by Amazon — more than Google, Microsoft, Alibaba and IBM combined.
When Alibaba entered the U.S. market in 2015, it was up against nine-, five- and two-year incumbent advantages from AWS, Azure and GCP, respectively. Three years later, the U.S. is in the midst of an escalating trade war with China, with tit-for-tat tariffs already reaching up in the tens of billions of dollars, with hundreds more potentially looming. The trade war escalated on claims by the U.S. that China was infringing on its intellectual property.
The trade war has clear impacts on small businesses, farmers and manufacturers, but spillover into the cloud computing arena are looking increasingly imminent.
