China's Alibaba is planning to invest a massive $1 billion into its Aliyun cloud computing business in the next three years.
With this notable investment, Alibaba's Aliyun is gunning for Amazon and its Web Services division, heating up the competition between the two e-commerce companies.
Analysts estimate the global cloud computing market is worth roughly $20 billion, and Alibaba wants a bigger piece of the pie. The company announced that its investment will help set up new data centers for Aliyun in various regions across the globe, including Singapore, the Middle East, Europe and Japan. Moreover, the company also intends to sign business deals with enterprise technology and telecom providers in those markets.
So far, Amazon and Alibaba have not been direct competitors in e-commerce, i.e. their core business, outside of China. The upcoming global expansion of Aliyun, however, will pit the company against Amazon Web Services (AWS), which has proved to be an important and lucrative business division for Amazon.
Simon Hu, Aliyun president and former chief of Alibaba's microfinance arm, said in an interview that Aliyun has focused on the Chinese market so far, but now, after six years, it has the "technological maturity" to go up against U.S. cloud services such as AWS, Microsoft and IBM, according to Reuters.
The executive further reveals Aliyun's goal to soar past Amazon in four years, regardless of whether it overtakes the Seattle-based company in terms of technology, customers or global scale.
"Amazon, Microsoft and others have already laid the groundwork for us by educating the markets about cloud in the U.S. and Europe, so we have an even better opportunity to join in the competition."
"This additional US$1 billion investment is just the beginning; our hope is for Aliyun to continually empower customers and partners with new capabilities, and help companies upgrade their basic infrastructure," added Alibaba CEO Daniel Zhang in a press release. "We want to enable businesses to connect directly with consumers and drive productivity using data. Ultimately, our goal is to help businesses successfully transition from an era of information technology to data technology."
Nevertheless, Aliyun will face some fierce competition along the way and will have to go up against notable technology players. Back in 2014, Amazon was at the top of the global cloud infrastructure with a hefty 28 percent share, while Microsoft, IBM and Google were next in line with 10 percent, 7 percent and 5 percent, respectively.
It remains to be seen whether Aliyun's plans to overtake Amazon will materialize, but Alibaba is willing to pour $1 billion into the business and take it global, with AWS as its main target.