Alibaba invest $1 billion in cloud services to take on Amazon

Chinese e-commerce company Alibaba will invest $1 billion in its cloud-computing arm to throw down against Amazon.com Inc.’s Web Services (AWS) division.

The two online competitors will compete for a market estimated to be worth $20 billion according to re/code. The capital will be used to expand Aliyun, which currently has data centres in China, HongKong, and Silicon Valley, into other international markets.

The company plans to target the Middle East, where it recently formed a joint venture with Dubai-based holding company Meraas, Singapore, Japan, Europe. The firms also plans to strike business partnerships with telecom and enterprise technology provides in those regions.

Although Alibaba and Amazon have so far avoided competing directly in their core business of e-commerce outside China, Aliyun’s international expansion takes aim squarely at Amazon Web Services (AWS), an increasingly central and profitable division of the Seattle based company.

Amazon shares soared last week after the company reported, among other items, an 81 percent revenue increase for AWS, which hosts Web customers like Netflix and Airbnb.

Aliyun also unveiled a new strategic partnership with Youyou software, the largest software vendor in China. Youyou will aliyun to target enterprise customers in Asia with needs in cloud computing, Big Data, digital marketing and e-commerce.

Aliyun competes directly with Amazon Web Services, Which is also intent on global growth. Its backing from Alibaba, however, means that Aliyun has the ability to experiment with technology like low-power server processors, which might help it save a lot of money on electricity bills as it deploys new infrastructure and gives it an edge over AWS.

Aliyun is a reminder that Alibaba’s scope goes far beyond being China’s largest e-commerce company. In addition to providing services for other companies, Aliyun powers projects like what it calls the first “cloud hospital” in China. If these initiatives succeed, it means Alibaba and its units may eventually hold a sizeable stake in almost every aspect of daily like for Chinese consumers, from grocery delivery to healthcare.

Aliyun also said Wednesday it had teamed up with Chinese enterprise software provider Youyou to offer cloud infrastructure services to Youyou’s customers.

Simon Hu said the partnership would help promote cloud adoption in China, which had considerable room for growth as the government continues its campaign to digitise Chinese industry.

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