Data released by IDC Consulting shows that Huawei Cloud's share in China's public cloud IaaS market has risen to 11%, ranking second with Tencent Cloud.

◎Dacai Emperor (ID:znfinance) | Tangchao

IaaS layer is called the key infrastructure in the entire cloud computing industry chain. It often represents the strength of a cloud computing manufacturer in core resources such as computing power and cloud storage.

In the past few years, the "No. 1" and "No. 1" in the IaaS rankings of China's public cloud have been firmly occupied by Alibaba Cloud and Tencent Cloud.

But at the end of 2020, the industry structure changed. Data released by IDC Consulting shows that in 2020Q4, Huawei Cloud 's share in China's public cloud IaaS market has risen to 11%, ranking second with Tencent Cloud. In 2021H1, Huawei Cloud's market share continued to rise, reaching 11.2%, officially surpassing Tencent Cloud (11.1%).

An industry veteran said that IaaS underlying cloud computing is actually very standardized. As long as large companies like Huawei and ByteDance are willing to spend money, they are likely to grow into industry giants. But it is worth noting that the gross profit margin of IaaS is only about 15%, while the gross profit margin of PaaS and SaaS can reach 50% and 70% respectively.

PaaS and SaaS are cloud computing service models derived from IaaS infrastructure. The prosperity of the two demonstrates the resource accumulation of cloud computing manufacturers in terms of technology and business ecology.

In order to cope with Huawei Cloud's "wolf-like" attack, Alibaba Cloud and Tencent Cloud have implemented differentiated competitive strategies, began to burn the war into the PaaS and SaaS fields, and followed the trend to attack Huawei Cloud's "back garden" - hardware and chips. In October and November 2021, Alibaba Cloud and Tencent Cloud successively released their first self-developed chips.

At the same time, ByteDance, which has 1.9 billion monthly active users around the world, also came to "nuggle". On December 2 last year, volcanic engine was upgraded to an independent BU and released a full range of cloud service products.

At this point, China's cloud computing manufacturers are divided into two schools. One is Alibaba Cloud, Tencent Cloud, and Byte Cloud based on the Internet traffic ecosystem, and the other is Huawei Cloud based on the hardware communication device ecosystem. In addition, the four companies each have different genetic and strategic development directions.

Because before, Emperor Dongcai has analyzed Alibaba Cloud and Tencent Cloud in many articles, this article will focus on Huawei Cloud and Byte Cloud, and try to discuss with readers:

1｜The help and constraints of enterprise genes and development strategies on cloud computing business;

2｜Conflict, competition and game between different cloud computing ecology.

Rising stars

"Cloud computing is an old wine in a new bottle." "Cloud computing is still a relatively advanced thing." " Alibaba is full of confidence and hope for cloud computing." In March 2010, at the China IT Leaders Summit, Robin Li , Ma Huateng , and Jack Ma launched a verbal battle around cloud computing.

Dacai Emperor checked the list of guests at that time. Although there was no Huawei helm Ren Zhengfei, Huawei executives, including him, are likely to have learned about the content of the debate between the three Internet giants from newspapers or other media.

The business world is always in a turbulent tide. Just eight months later, Huawei, which "makes wealth in silence", officially announced its entry into the cloud computing field and released a global cloud computing strategy and end-to-end solutions. In the same year, Huawei quietly brought more than 40 seed experts in the domestic public cloud field.

However, in the next five years, compared with the players such as Alibaba Cloud, Tencent Cloud, and Tianyi Cloud , Huawei Cloud has not caused much trouble.

Huawei Cloud's conservatism and hesitation originated on the one hand that Huawei was making efforts toward consumer business with smartphones as its core, and on the other hand, it was mainly related to Huawei's "funding father" - China Telecom , China Mobile and other communications operators are also deploying cloud computing services.

Ren Zhengfei once said, "Huawei's cloud computing is different from traditional IT companies. We must hold on to telecom operators tightly, otherwise it will be a dead end."

But by 2015, the market environment has undergone drastic changes. On the underlying infrastructure side, new technologies such as AI and cloud computing are about to emerge. They not only began to reshape the Internet world, but also began to transform the field of physical industries.

For Huawei, as of the end of 2015, its smartphone market share in China had soared to 14.5%, and its global market share reached 7.4%, second only to Samsung and Apple .

However, when the consumer business has become the leader in the industry, the Huawei cloud computing service sector, which represents the future development direction, is almost blank.

executives realized the crisis of backwardness. At the time, Huawei CEO O Xu Zhijun shouted at many meetings, "It would be too late to not do cloud computing." The horn of

sounded, and various resources were quickly mobilized and gathered. In March 2017, Huawei established its independent Cloud BU, which was led by Zheng Yelai, president of IT product line, , and . The following year, Huawei split the IT product line (Kunpeng + Ascend) and intelligent computing product line (server, etc.) in the product and solution, and reorganized it from Cloud BU into Cloud&AI.

In January 2020, in the eighth month after being sanctioned by the United States, Huawei once again increased its investment in cloud computing business and officially upgraded Cloud&AI to Cloud&AI BG, becoming the fourth largest BG after operator BG, enterprise BG, and consumer BG.

According to CITIC Securities calculation data, with the continuous upgrading of the organizational structure, Huawei Cloud's market share and revenue scale are also continuing to rise. In 2020, Huawei Cloud's market share in the IaaS cloud computing field was 11%, with revenue of US$2.67 billion, or approximately RMB 16.894 billion, a year-on-year increase of 202.8%. During the same period, Huawei Cloud's overall revenue increased by 168% year-on-year.

From the perspective of the product and service architecture of the official website, Huawei Cloud is similar to Alibaba Cloud, Tencent Cloud, and Byte Cloud. They all charge related fees based on cloud storage, computing power, database services, and industry solutions. But one thing is that Huawei also has smart hardware business.

benefited from Huawei Cloud's rapid growth. In 2020, Huawei's enterprise business segment revenue was 100.3 billion yuan, a year-on-year increase of 23%. In 2021H1, Huawei's corporate business segment revenue was 42.9 billion yuan, an increase of 18.1% year-on-year, with outstanding performance.

is similar to Huawei Cloud, ByteDance entered the cloud computing track again later.

An interesting story is that in 2017, a mobile phone manufacturer found ByteDance and hoped to apply its recommendation algorithm to the mobile phone application store. Yang Zhenyuan, who was the head of algorithms and data technology at the time, believed that technology could be reused directly to the outside world, and the additional cost was actually not high, so he decided to take this order.

But Yang Zhenyuan did not expect that in less than a year, the revenue of the mobile phone manufacturer's app store almost doubled. ByteDance smelled new business opportunities, and various departments began to replicate case experience, and its To B business segment set sail.

According to public information, in June 2020, ByteDance's enterprise technical service platform Volcano Engine was officially launched.

In 2021, in the context of the education business being hit by regulatory policies and the growth of traditional advertising and marketing business slowed down, ByteDance also chose to bet on cloud computing.

According to reports, on November 2 last year, in the new round of organizational structure adjustments released by "new coach" Liang Rubo , Volcano Engine was listed as the six core business segments

On December 2, Volcano Engine was upgraded to an independent BU, released a full-series cloud service product, and began to enter the public cloud market. ByteDance Vice President Yang Zhenyuan was appointed as the head of the BU.

The rise of new giants

"Huawei Cloud's strategy is to be the black soil of the smart world." In April last year, at the Huawei developer conference , then Huawei Cloud CEO O Yu Chengdong expressed confidently.

In this regard, many industry veterans believe that Huawei Cloud's confidence in the B-end and G-end is due to its special hardware device genes, as well as its advantages in many fields such as cloud computing technology, operation model, channels and delivery.

combined with the research reports of CITIC Securities and Guotai Junan Securities , in terms of underlying technical architecture and services, Huawei Cloud already has a full-stack cloud computing technology architecture system including IaaS, PaaS, and SaaS.

However, it is worth noting that compared with Internet traffic manufacturers such as Alibaba Cloud, Tencent Cloud, Byte Cloud, etc., the platforms or applications such as the Qingtian Architecture (IaaS), Huawei Cloud Stack (PaaS), and WeLink (SaaS) can all connect to chips or IOT smart hardware and other devices, as well as the Hongmeng and Kunpeng scene ecosystem formed around smartphones and smart devices.

In addition, Huawei Cloud also has a deep technical accumulation in the field of "cloud computing + AI". Frost & Sullivan Previously released the "China Full Stack AI Market Research Report" shows that Huawei surpasses Baidu , Alibaba, Tencent , SenseTime and other companies in full stack, and is the most competitive. In terms of the operating model of

, the first-mover advantages of Alibaba Cloud and Tencent Cloud are mainly concentrated in the public cloud field. Huawei Cloud has taken a different approach, using public cloud to drive the development of private clouds, forming a differentiated competitive barrier.

However, this also makes Huawei Cloud face the trouble of business adjustments. The above-mentioned industry insider said that before, Huawei's private cloud was placed in the IT product line, and public cloud was in Cloud BU, and a large business was divided into two departments, resulting in duplicate resource investment and extremely poor business synergy. In addition, the customization cost of private cloud is too high and basically does not make money.

Therefore, after 2015, Huawei Cloud accelerated its transition to public and hybrid cloud models. Starting from 2020, Huawei Cloud once again adjusted the private cloud solution , gradually reducing customized services.

In fact, another important reason for Huawei Cloud to achieve the first-come is also due to its deep connections and sales channels on the enterprise and government ends.

A well-known story is that one day in 2020, Luo Zhenyu received an email from Huawei Cloud salesperson Chen Yinglin. The core content of the email was "We Huawei Cloud do things, not to make money from customers, but to help customers make money." This touched Luo Zhenyu and pried away tens of millions of yuan of orders from Alibaba Cloud to " get APP".

An Internet cloud manufacturer also said in an interview with " Caixin Weekly " that when he went to a local bank in the west to meet the bid, Internet traffic manufacturers such as Alibaba Cloud went to "say hello" temporarily. Only Huawei has a long-term procurement relationship with this bank and knows the heads of various departments of the bank.

CITIC Securities mentioned in its research report that Huawei Cloud is the world's largest telecom equipment manufacturer and the world's leading IT equipment manufacturer, which fully integrates the advantages of the original ICT equipment in terms of channels and delivery services.

Compared with Huawei Cloud, Alibaba Cloud, and Tencent Cloud, Byte Cloud focuses more on the PaaS and SaaS fields in its early stages of development, while in terms of IaaS, Byte Cloud chooses to apply the underlying servers of other major cloud computing manufacturers.

Therefore, at present, Byte Cloud's overall advantages are relatively small, and it is mainly concentrated in PaaS and SaaS application products in the fields of content and video distribution, marketing data management, AB testing, content production and analysis.

However, in recent years, Byte Cloud's office collaboration SaaS product Feishu has developed extremely rapidly, and its user scale has exceeded Huawei's WeLink. According to QuestMobile statistics, as of June 2021, DingTalk html' April active users were 193 million, enterprise WeChat was 83.64 million, and Feishu has ranked third in the industry, at 4.31 million.

Challenge and boundaries

Although Huawei Cloud and Byte Cloud are full of momentum, they still face huge challenges in the face of fierce counterattacks from peers such as Alibaba Cloud, Tencent Cloud, and Baidu Cloud.

, especially within the company, on May 18 last year, Huawei announced a new personnel appointment and removal, and Yu Chengdong was removed from the position of Huawei Cloud CEO, and Zhang Ping An , then president of Cloud BU and president of consumer cloud services. It is worth noting that this is the fourth change of Huawei Cloud management in half a year.

This may be largely related to Huawei's hardware device genes. It is reported that, including Yu Chengdong, Huawei Cloud has a large number of senior executives and grassroots employees who have transformed from hardware departments or consumer businesses. This group of people lacks the knowledge reserve and experience of cloud operations, and still lacks in service and system solution delivery.

In addition, an industry insider revealed that although Huawei Cloud's performance in the past year is commendable, most of them are sold in packages with hardware devices. This strategy is suitable for the market, but it is not conducive to becoming stronger. The same is true for

byte cloud. Most of its internal employees come from C-end user business. They are all traffic-oriented thinking, and the Volcano Engine BU has just been established, so how powerful the organization's combat effectiveness still needs to be tested.

CITIC Securities also believes that as a platform service, although Huawei and ByteDance have technological advantages, they are not enough to end the battle.

This means that Huawei Cloud's business thinking must transform from "box" solution sales to cloud platform operation service model, and Byte Cloud must also make up for problems such as insufficient sales channels.

In addition, in terms of the PaaS and SaaS ecosystems that are currently the most competitive, Huawei Cloud and Byte Cloud both need to "make up lessons".

Taking the office system field as an example, Alibaba Cloud already has "cloud-target integration" and "DingTalk + low-code ecosystem", and its DingTalk user scale has exceeded 500 million.

Tencent Cloud has the "Enterprise WeChat + WeChat low-code platform", and its WeChat user scale has reached 1.26 billion.

Although Huawei Cloud has launched the PaaS platform Huawei Cloud Stack + Office SaaS software WeLink + Application Cube AppCube low-code platform, its overall product experience is inferior to Alibaba Cloud and Tencent Cloud. And, more importantly, Huawei, as a communications equipment operator, has a relatively poor user traffic ecosystem.

In comparison, although Byte Cloud is backed by 1.9 billion monthly active users around the world, due to its late entry, it currently only has PaaS + office SaaS software Feishu, and has not launched a low-code platform.

However, volcano engine general manager Tan Tie believes that from the perspective of penetration rate of cloud computing, the penetration rate of cloud computing in China's market is still relatively low, and the market still has a lot of room for incremental growth. In addition, multi-cloud strategy has become a trend, which will bring many opportunities to latecomers.

This is indeed true.The digital transformation of China's cloud computing industry and real economy is still in its early stages of development, and new market opportunities will continue to emerge in the future. It is still unknown who will win the battleground of

.

Reference:

1 | Caixin Weekly, Zhang Erchi, "China Cloud Total War"

2 | Guotai Junan, Li Muhua, "Huawei Cloud: The Birth of a New Giant"

3 | CITIC Securities, Xu Yingbo, Chen Junyun, "Huawei Cloud: The World's Fastest Growing First-line Cloud Manufacturer"

4 | CITIC Securities, Xu Yingbo, Chen Junyun, "ByteDance Matters Review: Release all cloud products and continue to focus on the enterprise service market"

Description: The data originates from public disclosure and does not constitute any investment advice. Investment is risky, so be cautious when entering the market.