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Cloud Wars – Alibaba Says ‘Open Sesame’ By @EFeatherston | @CloudExpo #Cloud

The cloud wars in many cases have turned into pricing wars between vendors

Cloud Wars - Alibaba Says ‘Open Sesame' and Joins the Battle

No one can deny that it has been an interesting year for the cloud wars. Last year I discussed all the 800lb gorillas in the room battling it out for a piece of the cloud treasure. The interest is understandable. IDC forecasts global public IT Cloud services spending to reach nearly $108B by 2017. Another respected industry analyst predicts that by 2016 the bulk of IT spend will be for the cloud. That's a big treasure. A year later, all the gorillas still seem to be standing, yet Amazon still seems to dominate in the space. Amazon's cloud revenues are larger than their next 4 competitors (Microsoft, IBM, Google, Salesforce) combined. Each of those competitors is an 800lb gorilla in their own right. Given the size of the current combatants, is there any room for a new one to enter the battle?

Alibaba is already in the treasure room
Until recently, many had not heard of Alibaba. Then, last September, they had the largest global IPO ever, and in the process, almost became a household word. For those that may have been on a desert island at that time, Alibaba is China's, and by some measures, the worlds, largest eCommerce site. Transactions on its sites last year totaled over 248 billion dollars, which is more than Amazon and eBay combined. By any definition, they are an 800lb gorilla in their own right. As with the case of Amazon, Alibaba built a significant infrastructure operation to support their eCommerce initiatives. Alibaba then leveraged what they built to offer Infrastructure as a Service (IaaS) capabilities to Chinese businesses. According to Alibaba, their cloud services, operating under the name Aliyun, currently has 22% of the IaaS marketplace in China, servicing over 1.4 million customers. Alibaba is now looking to expand the service offerings for Chinese businesses globally, and has recently opened its first data center outside of China, in none other than Silicon Valley.

In the ongoing battles, market share is important, but one must still make money. The cloud wars in many cases have turned into pricing wars between vendors. In order to succeed in growing business in a marketplace with falling prices, controlling costs is a key factor. One of the biggest costs for large data centers is power. Many cloud vendors have struck partnerships with chip vendors such as Intel to build custom, lower power chips for their data centers. Alibaba has partnered with Intel and ARM in a similar fashion.

China is a key battleground in the cloud wars
While Alibaba is looking to expand its data centers outside of China, their focus is still the businesses within China. Meanwhile, several of the other 800lb gorillas (Amazon, Microsoft, IBM) have all started to try and expand into China. Each of them has successfully launched data centers in China over the last year, specifically targeting Chinese businesses. The reason is simple: China is a huge untapped resource in the growth of cloud computing. IDC predicts the rapid growth potential in the Chinese tech market will account for up to ‘43% of the tech market growth worldwide'.

This creates an interesting dichotomy between Alibaba and the other cloud providers in the Chinese marketplace. Alibaba is extremely entrenched in data centers within China and seeking to expand globally. The other vendors have significant capacity globally, but are also seeking to gain inroads within China. All are trying to attract the untapped growth potential of the Chinese businesses. Alibaba has an early start and advantages in that marketplace. Does it guarantee them success? Time will tell.

None of the other competitors are going to give up without a fight, and they are all formidable and key players in the ongoing cloud wars. You thought the past year was an interesting year in the cloud war? Just wait. With Alibaba clearly entering the battlefield, there could be all kinds of new and interesting skirmishes to come. Alibaba is in the treasure room with the other 800lb gorillas. How many will still fit in there come next year?

This post is brought to you by The CIO Agenda.

KPMG LLP is a Delaware limited liability partnership and is the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. The views and opinions expressed herein are those of the authors and do not necessarily represent the views and opinions of KPMG LLP.

More Stories By Ed Featherston

Ed Featherston is VP, Principal Architect at Cloud Technology Partners. He brings 35 years of technology experience in designing, building, and implementing large complex solutions. He has significant expertise in systems integration, Internet/intranet, and cloud technologies. He has delivered projects in various industries, including financial services, pharmacy, government and retail.

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