Alibaba Cloud presses the acceleration button for external expansion

Author | Chai Xuchen

Editor | Liu Baodan

The launch of Alibaba Cloud's new data center in Thailand once again brings the global strategy of Chinese tech giants into the spotlight.

On February 13, Alibaba Cloud announced the official opening of its second data center in Thailand, which will provide stronger cloud computing resources for local enterprises, Chinese companies going abroad, and local developers to meet the growing demand from emerging sectors such as the internet and fintech.

The site is located just 50 kilometers from the core area of Thailand's Eastern Economic Corridor, and Alibaba Cloud's strategic intentions are clear: to serve the burgeoning tech companies in Bangkok and to provide industrial cloud services for Chinese companies like BYD and CATL expanding in Thailand. Along with previously planned nodes in South Korea, Singapore, Indonesia, and the Philippines, a cloud network covering the core economic belt of ASEAN is gradually taking shape.

From a newcomer expanding outward to beginning to grow rapidly, Alibaba Cloud has explored for ten years.

Looking back to 2015, when Amazon AWS dominated the global public cloud market with an absolute advantage, Chinese companies' attempts to go abroad were still in their infancy. At that time, Alibaba Cloud's international business primarily served the overseas warehouse systems of cross-border e-commerce: supporting cross-border transactions with cloud computing as platforms like AliExpress and Lazada expanded.

A turning point occurred in 2017, with the advancement of the "Belt and Road" digital Silk Road initiative. Alibaba Cloud established its first overseas innovation center in Malaysia, and this "technology for market" model began to show results, with Alibaba Cloud's market share in Southeast Asia jumping from 3.7% in 2018 to 15.2% in 2023, forming a three-way competition with AWS and Microsoft Azure.

Behind the acceleration of the outbound strategy is the pressure that Alibaba Cloud must face.

The growth rate of the domestic cloud computing market has slowed to 12%, and the smoke of price wars has not dissipated, with operators continuously eating into market share based on network advantages. Meanwhile, Southeast Asia still maintains a compound annual growth rate of 38%, with Indonesia even experiencing a staggering 217% surge in public cloud spending in a single quarter.

Gartner's report shows that several Asian countries, including Indonesia, the Philippines, and Thailand, have cloud computing market growth rates around 60%, far exceeding the 30%-40% in Europe and the United States. According to IDC's forecast, the Southeast Asian cloud computing market size will reach $40.3 billion by 2025, while the current cloud penetration rate for enterprises in the region is only 28%, far below China's 65%.

For cloud vendors, the Southeast Asia layout coincides with a historic opportunity. Currently, multidimensional competition is unfolding in this digital blue ocean: Microsoft is investing $1.7 billion to build data centers in Indonesia, AWS plans to establish a regional cloud center in Thailand, while Alibaba Cloud has secured cloud migration orders from Vietnam's leading e-commerce platform Tiki with its live-streaming e-commerce solutions With a ten-year period in mind, Alibaba Cloud is centered in the Asia-Pacific region, expanding outward. According to Gartner data, Alibaba Cloud is the largest cloud service provider in China and the first in the Asia-Pacific region. Its growth in overseas markets has also surged, with the market size increasing more than 20 times in five years.

For the entire Alibaba Group, Alibaba Cloud's international expansion has surpassed mere business development.

In the third quarter financial report for fiscal year 2024, the International Digital Commerce Group (AIDC) reported a year-on-year revenue growth of 44%, while Alibaba Cloud's international business achieved a year-on-year growth rate of 28%, with the synergistic effect between the two becoming increasingly evident. Lazada's peak order processing capacity in Southeast Asia and Daraz's real-time recommendation system in South Asia have both been deployed on Alibaba Cloud's Southeast Asia nodes.

This "business platform + cloud computing" dual-driven model is a Chinese interpretation of Amazon AWS's successful path, yet it carries distinct regional characteristics—packaging and exporting domestic digital solutions.

In Indonesia, the BDC data center co-built by Alibaba Cloud and telecom operator Telkom handles real-time scheduling for millions of Gojek riders; in Vietnam, the overall cloud migration project of the Tiki e-commerce platform has validated Alibaba Cloud's stability in tropical high-temperature and high-humidity environments; in Singapore, the hybrid cloud architecture built for Sea Group has set a precedent for parallel processing of gaming, e-commerce, and payment business streams.

These scattered technological nodes across the map are being woven by Alibaba Cloud into a new type of digital service network. However, greater imagination comes from the catalysis of cloud services in the AI era.

On February 13, Alibaba co-founder Joseph Tsai confirmed the rumors of Alibaba's collaboration with Apple, stating that Apple needs a localized partner in China.

Apple's choice acts like a prism, reflecting the unique competitive advantages of Chinese cloud computing companies. This means that Alibaba has shed its "e-commerce" label, and its AI capabilities are being recognized globally, showcasing the compatibility of Alibaba Cloud's Tongyi with Apple's vast user base.

The collaboration with Apple opens up new imaginative spaces. When the Tongyi large model reaches hundreds of millions of users through the iOS system, Alibaba Cloud essentially gains the opportunity to participate in the top-level design of the global AI ecosystem. If this "model as a service" (MaaS) business model can be successfully implemented, it may completely change the competitive landscape for cloud computing providers.

During the recent expansion into Thailand, Alibaba Cloud's international vice president Yuan Haojun revealed that the local cloud computing market is in a phase of rapid expansion, with strong demand for digitalization and AI from local enterprises. Alibaba Cloud aims to increase investment to help local customers seize opportunities in the AI era.

Looking back at the steel data centers in the Gulf of Thailand, one may better understand the deeper logic behind Alibaba Cloud's international expansion. As the internet traffic dividend in China reaches its peak, Chinese tech companies are entering the "deep water zone" of international expansion. Cloud computing is no longer just a vehicle for technology output; it is the key to reconstructing the rules of the global digital economy.

Fifteen years after its establishment, Alibaba Cloud has officially become the core ballast business of Alibaba Group and will represent Alibaba in the international market. This will determine whether Alibaba can surpass the glory of its past as the king of e-commerce and become a truly globally influential tech giant However, the journey is by no means smooth. As a service provider, Alibaba Cloud's business largely depends on the situation of domestic companies going overseas. At the same time, the biggest uncertainty faced by cloud computing vendors still comes from data security and compliance challenges, which are influenced by international relations, local systems, and policies.

In this sea full of uncertainties, Alibaba Cloud must continuously balance its stance to respond to various challenges.

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