at the turning point, a critical moment.
article丨HuaShang Taoluo Geng Kangqi
In 2016, Alibaba Cloud surpassed Google Cloud in the public cloud market for the first time and entered the top three in the world.
At the cloud conference in 2017, Alibaba Cloud Vice President Li Jin was full of confidence: "This is just the beginning. In the next two to three years, Alibaba Cloud will surpass it again and become one of the two poles in the cloud computing service field."
Five years have passed, Alibaba Cloud has not achieved its wish, but its market position has weakened, and the entire Chinese cloud market has also become a bit more gloomy.
[The "No. 1 Cloud Computing Companies" with Internal and External Disasters]
In 2016, Alibaba Cloud's share in China's IaaS market reached 40.67%, exceeding the total scale of the second to tenth places, showing absolute dominance. Li Jin said at the 2017 Yunqi Conference:
"No surprise, I think it will reach 50% this year."
But the accident still came.
In 2017, Alibaba Cloud's share reached 45.5%, but this is both a high point and a turning point. After that, its share has dropped to 34.3%.
Everything is afraid of comparison. As the originator of e-commerce, Amazon has now become the world's number one in the world, and its revenue growth and profitability have also become the company's second largest source.
If you look at AWS and Alibaba Cloud from the perspective of intuitive financial data, from April to June 2022, AWS revenue reached US$19.7 billion, a year-on-year increase of 33%; while Alibaba Cloud only had US$2.6 billion, a year-on-year increase of 10%.
In addition to the fact that the annual revenue cannot keep up with AWS in one quarter, Alibaba Cloud's money-making ability is also challenged, although it achieved a profit of 1.146 billion yuan in fiscal year 2022, it is the only cloud service provider in China to achieve breakeven. , but the profit margin is very touching: 1.5%.
The problem of studying these phenomena in Alibaba Cloud is nothing more than the internal and external layers.
In , Alibaba Cloud loses customers and large orders.
Ali Cloud is one of the pioneers in the government cloud market and has proposed many innovative solutions, but in this field, it is losing its market influence.
At the end of 2021, Alibaba Cloud "wasted" and complained to a ministry as Party A's ministry. Because of a large order worth over 100 million yuan, it was "intercepted halfway" by a company called Nanjing Fenghuo Xingkong. Alibaba Cloud’s complaint is: the technical parameters of the bidding documents are set, and there are cases where differential treatment or discriminatory treatment is imposed on suppliers under unreasonable conditions.
Three months later, the investigation conclusion came back: Alibaba Cloud’s complaint was rejected as “the complaint lacks factual basis.”
It is normal for Alibaba Cloud to have a temper and be irritating, because in the field of government cloud , it has been really not smooth recently.
On December 22, 2021, the Cybersecurity Administration of the Ministry of Industry and Information Technology reported that Alibaba Cloud did not report it in time after discovering serious security vulnerabilities of the Apache Log4j2 component, and therefore suspended Alibaba Cloud as a partner for 6 months.
In 2021, China Telecom operators accelerated the "cloud network integration", and in 2022 " East Number and West Calculation " accelerated its implementation, triggering a government-enterprise market of 100 billion yuan. But facing such a big cake, Alibaba Cloud did not get a big piece.
In the past year, China Telecom has obtained 104 government and enterprise orders of over 100 million yuan, 68 China Mobile, 634 html html , and only 9 Alibaba Cloud. The revenue of the three major operators exceeded 70 billion yuan in the first half of the year, with a growth rate of 100%, twice that of Alibaba Cloud.
In 2016, Wang Jian , who was then the chief technology officer of Alibaba , proposed the concept of " city brain " for the first time. However, by 2021, the Alibaba Cloud Summit revealed that 40 cities were deployed, which was a disadvantage compared to the "urban intelligent bodies" that have landed in more than 50 cities in Huawei .
Compared to the poor progress of these businesses, Alibaba has lost its own customers in another important field: the Internet.
Byte was once the number one customer of Alibaba Cloud, but it has already moved towards self-built.The reason is that instead of giving billions to cloud manufacturers every year, it is better to build a self-built data center, not to mention that everyone is saving money, and bytes can save as much as possible, so I turned around and found Qinhuai Data for cooperation.
In addition to , just like the lyrics of Zhou Huajian , "There is a group of geniuses chasing behind", among the pursuit team, the most ferocious one is the emergence of Huawei Cloud .
Integrated in 2017, Huawei Cloud, which currently accounts for 18% of the market share and ranks second in the country, is becoming one of the most troublesome competitors to Alibaba Cloud. And Tencent Cloud is also increasingly in close contact with Alibaba Cloud.
Also, the competitive landscape is inclined toward a situation that is conducive to pursuing soldiers.
For example, Huawei's accumulation of channel resources is becoming more and more effective. Taking the development of business with traditional enterprises such as local banks as an example, Internet cloud manufacturers like Alibaba Cloud can only go to the door for sale. Huawei may have established procurement relationships through other hardware equipment and facilities businesses, and it is more convenient to know the relevant person in charge.
Ali Cloud President Zhang Jianfeng once lamented: "The cloud is actually very standardized, and all networks and storage interfaces are standardized."
The serious homogeneity of technology means that as long as giants such as Huawei Cloud and Tencent Cloud are willing to spend money and time, it will be difficult for Alibaba Cloud to accumulate in the IaaS layer to become a barrier.
In addition to the two internal and external issues, Alibaba Cloud has also the changes in the overseas market structure.
In overseas markets that have more advantages and foundations than other domestic competitors, Alibaba Cloud is also being forced to strategically shrink.
In 2015, Alibaba Cloud entered the North American market and built a data center in the eastern and western United States. But in a special context, it has to press the "pause button".
The United States closed the door to Chinese cloud companies, which is a major blow to Alibaba's long-term development.
The Southeast Asian market, which was originally dominated by Alibaba Cloud, is now targeted by players such as Tencent Cloud, Huawei Cloud, Amazon AWS, Microsoft Azure, etc., further exacerbating Alibaba Cloud's pressure to go overseas.
These combination has also greatly increased Alibaba's challenges in the global market.
Although many third-party data institutions still regard Alibaba Cloud as the third largest cloud in the world, in the 2021 report data released by Statista, it even claimed that Google Cloud has replaced Alibaba Cloud and become the third largest cloud manufacturer in the world.
Ali is a pioneer in the development of China's cloud computing business. When cloud computing is not optimistic, Jack Ma said, "I invest 1 billion in Alibaba Cloud every year. I will invest for ten years, and I can't do it!"
The forward-looking trend and investment in independent research and development have also made Alibaba Cloud quickly become a major player in the global cloud market, and played a key role in the development of China's cloud market. There was even a saying at one time: "China has only two types of clouds, one is the cloud that is used for politicism, and the other is the autonomous and controllable Alibaba Feitian Cloud."
Although Alibaba Cloud is still the number one in the Asia-Pacific cloud market, behind such challenges is that the entire Chinese cloud market has reached a critical moment.
[Global cloud manufacturers usher in a "front wind"]
Under the epidemic, enterprises have accelerated their access to the cloud. Data from market research institution IDCh shows that in 2020, China's public cloud market reached US$19.38 billion, a year-on-year increase of 49.7%, the highest growth rate in the world.
But this also accelerated the overdrawing of the development dividends of the cloud market, and many problems began to be exposed.
China's Internet growth has peaked, and there are fewer and fewer Internet unicorns in size such as Pinduoduo, ByteDance, , Meituan . The cloud computing market has entered a period of slow growth, and the marginal effect brought to cloud manufacturers by traditional Internet companies is decreasing .
Even some Internet giants such as ByteDance originally purchased nearly 10 billion yuan on Alibaba Cloud. But after it formed the volcano engine cloud service itself, Alibaba Cloud will gradually lose this largest customer, and it is highly likely that both sides will become new competitors.
In addition, the overall economic development is also in a relatively weak stage, especially private enterprises lack the willingness to invest and expand, which has turned the form of the cloud market into a way that everyone is sluggish and strives to survive first.
Another side of Alibaba Cloud's progress is the growth rate of Huawei and Tencent is actually slowing down.
The revenue growth rate of Tencent's " FinTech and Enterprise Services" which includes Tencent Cloud fell from 47.4% in Q1 2021 to 0.8% in Q2 2022. Huawei Cloud's revenue growth rate slowed from over 100% in Q1 2021 to 38% in Q4 2021.
The 2021 Discrete Manufacturing Cloud Survey released by McKinsey shows that nearly two-thirds of industrial enterprises actively use cloud solutions, but far fewer companies are getting cloud benefits. The reason is that most companies will not use it after going to the cloud, or they will spend a higher cost to hire technicians.
The combination of global cloud manufacturers and traditional industries has also hit the iron plate, thus restricting overall progress.
Compared with American companies, the management of Chinese cloud manufacturers is more extensive, and the digital technology in traditional industries is also weaker, which in turn pushes up the cost of the entire cloud business. This also makes Chinese cloud companies face another big challenge while their revenue growth is unfavorable: the profit level is not high.
At present, the gross profit margin of Chinese cloud companies is still only half that of American cloud giants.
Finance magazine pointed out that the collective pain of China Cloud is difficult to reverse in the short term, and the transformation period may last for more than two years.
In fact, the American cloud giant is not completely free of worries.
On December 18, 2013, Amazon, which just defeated IBM and won the CIA's major order, held a press conference at Beijing International Hotel , and announced that AWS (Amazon Cloud Service) will enter the Chinese market.
But in November 2013, China decided to establish the National Security Committee . "Information security" has become an important direction for national security supervision: China's data must remain in China, and technical services are expected to be provided by Chinese companies, which is an important regulatory principle.
It is difficult to obtain an IDC license, so it is impossible to carry out value-added telecommunications services such as data centers; it is necessary for local third-party companies to undertake the business, which also makes it difficult for foreign-funded enterprises to fully utilize the technical advantages of foreign-funded enterprises. The dream of foreign cloud dominating the Chinese market has become difficult to move forward.
Amazon and Microsoft have missed the rapid growth window of China's cloud market. They are still in the second echelon of the industry and are difficult to make a difference in the Chinese market.
As a matter of fact, China and the United States have closed the door for each other's cloud companies to enter their own markets on a large scale, which is not good news for Amazon or Alibaba Cloud.
In addition, this situation has led to another challenge - forcing related companies to compete more fiercely in other markets outside China and the United States, or even vicious competition.
Southeast Asia is a typical example. It is becoming a bloody hunting ground for the cloud giants in China and the United States.
In October 2015, Ma Lei, an employee of Alibaba Cloud, became the first "Ali person" to be sent to Southeast Asia.
He remembered that when he participated in the Asian Cloud Exhibition held by Singapore , there were only a handful of Chinese companies.
Seven years after that, Southeast Asia became Alibaba Cloud's main battlefield for going overseas, and more and more "Ma Lei" joined the development of territory. On May 20, Alibaba Cloud announced that the cloud data center in Thailand was officially opened, and it is also its 10th data center in Southeast Asia.
After years of hard work, Southeast Asia has become a fertile ground to support the growth of Alibaba Cloud's overseas market. At the 2021 Alibaba Investor Day, Zhang Jianfeng revealed that the revenue in the Southeast Asian market increased by more than 60%.
At present, the cloud computing market growth rate of Indonesia , the Philippines, Thailand and other Southeast Asian countries is around 60%; the overseas outing of Chinese companies such as games, short videos, cross-border e-commerce has also brought new growth opportunities to the Southeast Asian cloud market.
This has caused the cloud companies in China and the United States to set up heavy troops.
Starting from April last year, Microsoft plans to invest $1 billion to build its first regional data center in Malaysia . Tencent Cloud has opened its first data center in Thailand and has successively built three data centers in Indonesia and Singapore. Last September, Huawei Cloud also announced the launch of a service in Thailand, and Indonesia and the Philippines were included in the plan.
In February this year, after the opening of Amazon's Singapore AWS region, the AWS region located in Jakarta, Indonesia was officially put into use.
The gathered giants have their own strengths in their strategy of competing for customer resources.
In Southeast Asia, Alibaba and Tencent have invested in a large number of companies, and it is natural that the invested companies become their own cloud business customers. For example, Alibaba has invested in Southeast Asia e-commerce Lazada, while Tencent has invested in e-commerce Shopee. These e-commerce platforms have a huge demand for cloud business.
Huawei Cloud, relying on its good relationship with local telecom operators, can help overseas game manufacturers optimize from the telecom network level, thereby shortening screen delay. A game manufacturer bluntly said: "We cannot build computer rooms in a certain overseas area, because the cost is too high, so Huawei Cloud also provides us with great help in this regard."
Microsoft is better in government relations and software ecology.
The regulations on the collection, use and sharing of data information by various governments are becoming increasingly strict. This leads to companies that are not familiar with local regulations and easily touch the reefs and receive sky-high fines. Microsoft Cloud can help overseas companies to build a compliance system and implementation process. A software ecosystem that shares patents can help customers avoid claims by "patent rogue companies".
Amazon AWS's strategy is simple and crude, with its more than 1,500 products, it surpasses its opponents in terms of richness. It is also good at price wars and attracts customers with cost-effectiveness. As of May 2020, Amazon AWS's global market has cut prices by as much as 82 times.
In 2021, Alibaba Cloud led the market with a share of 25%, followed by Amazon AWS (15.8%), Microsoft Azure (14%), Huawei Cloud (11.9%), and Tencent Cloud (7.6%).
The cloud giant is in a stalemate in Southeast Asia, and the absolute winner has not yet appeared.
A fight is inevitable.
[Ali Cloud at the Crossroad]
Although the number of variables increases, Alibaba Cloud has achieved profitability for seven consecutive quarters and is currently the only profitable cloud service provider in China. Alibaba is still confident in cloud computing and has a long-term mind.
On July 26, Chairman of the Board of Directors of Alibaba Group , Zhang Yong , clearly defined cloud computing as one of Alibaba’s three major strategies in a letter to shareholders.
Historical president of Alibaba Cloud Hu Xiaoming admitted: "In terms of technology, we have experienced too many hardships and have stepped on too many pitfalls. These pitfalls have become the core of our technology, and no one can escape it."
The advantages of 's scale and technology provide enough confidence for Alibaba Cloud to continuously adjust and breakthrough in organizational and business strategies.
In March, Tsai Ing-hua, former president of Huawei's enterprise business group, was airborne as president of Alibaba Cloud's global sales.
Tsai Ing-hua worked for Huawei for 18 years, mainly responsible for sales strategic planning, channels and partner ecological construction from domestic to overseas markets. The government-enterprise downward team he promoted to form at Huawei has made Huawei's municipal and municipal revenue account for more than 40% of domestic government and enterprise affairs in 2020. And based on its predecessor, it brought more than 35,000 ecological partners to Huawei.
Solid work style, understanding of conduct, and regular military style are the impressions of him in the industry.
The first public debut, he proposed the optimization of the model of "industry main construction, region main battle" and the strategies of ecological concessions to regional sales and industry ISV (independent software developer).
The former is aimed at the sales service shortcomings that Alibaba Cloud must face; the latter is to build and win-win with ecological partners.
Traditional government and enterprise customers have limited understanding of the concepts and technologies of the cloud, and they pay more attention to customized services.Moreover, many industrial equipment is extremely expensive, and once there is a problem, it is very expensive, which also makes government and enterprise customers have a natural sense of distrust of Internet manufacturers like Alibaba Cloud.
Ali's sales team is mainly aimed at small and medium-sized enterprises and lacks experience in dealing with large and government customers. Xu Shijun, vice president of Alibaba Group, once publicly stated that Alibaba Cloud's government and enterprise customer service is a big challenge.
In April last year, Alibaba Cloud announced the adjustment of its organizational structure and established 18 sub-industry departments including digital government , manufacturing, finance, telecommunications, etc., divided into 16 regions, and the regional general manager is specifically responsible for localized operations.
Zhang Jianfeng said bluntly: "This is not available in the history of Alibaba Cloud."
This organizational upgrade is to sink the sales service team to various industries and regions to improve customer satisfaction.
Tsai Ing-hua’s strategy after taking office was to form a “sales army” with clearer value goals based on the iteration of Alibaba Cloud’s organization. At this point, Alibaba Cloud's new sales system has basically taken shape and quickly entered a combat state.
Coordinating with various industry partners can help Alibaba Cloud solve the contradiction between high customization needs and high labor costs for customized products, and create greater potential for customer growth.
In the fiscal year 2022, the business scale brought by Alibaba Cloud Partners has reached 18.5 billion, compared with 2.58 billion in fiscal year 2019, an increase of more than 7 times in four years. But Tsai Ing-hua was not satisfied because the numbers were not impressive enough.
Some traditional IT industries also feel that Alibaba Cloud, as an Internet manufacturer, is not close enough to the ecosystem for large customers, and it is difficult to integrate into the ecosystem for large customers.
To this end, Alibaba Cloud has newly upgraded to the business strategy of "adhering to partner first".
According to the capability tags of distribution partners, consulting partners, product ISV partners, etc., Alibaba Cloud has established a corresponding ecological team and tailored a series of rights and interests systems.
Including investing 1 billion special funds in the next three years, and jointly serving 300 cities across the country with distribution partners. Helped 5 distribution partners perform over 2 billion, 500 million, and 500 million. Provide exclusive support for consulting partners to serve Chinese companies going overseas and multinational companies entering China; jointly build cloud technology delivery standards, improve service partners' fulfillment capabilities, etc.
Tsai Ing-hua said: "I hope that while Alibaba Cloud makes 1 yuan, partners can make 2 yuan and 3 yuan." and estimate that the proportion of revenue brought by Alibaba Cloud's partner business this year is expected to exceed 30%.
When China set off a wave of digitalization, the computing power support provided by cloud computing is an important support for promoting the development of national strategies. More importantly, cloud computing security is related to information security.
Alibaba is the world's first large Internet company to run 100% of its core system on the public cloud. Amazon and Microsoft, also cloud computing giants, have not yet done this, which proves Alibaba's confidence in the cloud industry.
At the 2022 Alibaba Cloud Summit, Zhang Jianfeng expressed his intention to Back to Basic, that is, to focus on the essence of cloud computing, return to the bottom of technology, and released a special processor CIPU for cloud data centers.
He even made a bold statement: "CIPU will replace CPU and become the core of processing in the cloud era."
Ali Cloud's cloud computing operating system Feitian is the only self-developed cloud operating system in China.
On computers, Microsoft Windows+Intel system is the dominant; on mobile phones, Android/Apple iOS+ARM becomes the dominant one. Alibaba Cloud is trying to turn millions of servers into a supercomputer in the era of cloud computing using the Feitian operating system + CIPU combination.
This goal is not small.
It’s not just Alibaba Cloud. Since 2018, Huawei Cloud has experienced four organizational changes alone. As a company that started with traditional hardware, it is necessary to have the courage and determination to "revolutionize yourself" to a large extent in its cloud business.
At the Huawei Cloud Summit a month ago, Huawei Cloud announced the launch of three major measures: innovative cloud platform, entrepreneurship empowerment, and business resources, and officially launched Huawei Cloud Accelerator. In the next three years, 10,000 global high-potential start-ups will be empowered.
Compared with the "wolf" team and radical strategy of Alibaba Cloud and Huawei Cloud, Tencent Cloud has always been known for its stability. Therefore, Huawei Cloud unknowingly took away the second place in the Chinese market.
Tencent Cloud, which felt threatened, began to change its strategy. In February this year, Tencent Cloud launched a "lightweight" solution for cross-border e-commerce. In July, Tencent Cloud and Smart Industry Business Group (CSIG) announced the establishment of a government-enterprise business line.
It can be seen that Huawei Cloud and Tencent Cloud are pursuing breakthroughs under the pressure of competition and achieving incremental "blood production" as soon as possible - not only need revenue, but also net profit.
The entire cloud industry has passed the icebreaking period when cloud manufacturers are fighting each other, and has entered a comprehensive competition in the competition of value services and ecological construction.
This also means that China's cloud, represented by Alibaba Cloud, has reached a critical moment in the global market to engage in strategic and tactical game with the American cloud giants.
The success of these companies is related to their own development and will inevitably affect the future pattern of the entire Chinese company and even the Chinese economy in the global digital economy era.
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