Alibaba maintains lead in China’s hot cloud computing market as Tencent, Baidu play catch-up

Tencent Cloud ranked second with a share of 17.4% and Baidu was fourth with 8.7%.

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Alibaba Group Holding maintained its lead in China’s cloud computing market in the second quarter of 2019 while Tencent Holdings and Baidu chalked up strong growth, according to a recent report released by research firm Canalys.

China’s cloud infrastructure services market grew rapidly in the second quarter of 2019, with total spending up 58% year-on-year at USD 2.3 billion. Alibaba remains the clear leader, with a 43% market share. Tencent Cloud ranked second with a share of 17.4% and Baidu was fourth with 8.7%, although both firms showed strong growth.

“Competition in China has intensified, mainly due to local cloud service providers, including Alibaba Cloud, Tencent Clou, and Baidu Cloud,” said Daniel Liu, a research analyst at Canalys, last week. “Boosting revenue from cloud services is a top strategic priority for these companies amid growing domestic demand.”

Alibaba’s cloud computing business saw revenue grow 66% to 7.8 billion yuan (USD 1.1 billion) last quarter, primarily driven by an increase in average revenue per customer.

Tencent’s founder and chief executive, Pony Ma Huateng, said in May that the internet giant not only expects its cloud business to contribute to revenue but also serve as the platform connecting the consumer internet with the industrial internet. Earlier this year, Tencent said it wanted to enable greater connectivity across the Chinese industry, leveraging the capabilities and expertise it has built up serving consumers. Meanwhile, Baidu is developing an AI could computing center in north China to help build more smart cities, according to Xinhua.

Cloud computing enables companies to buy, sell, lease or distribute over the internet a range of software and other digital resources as an on-demand service, just like electricity from a power grid.

These resources are then managed inside data centers. Cloud services form part of China’s drive to upgrade its economy and embrace a wide swathe of new technologies such as AI, internet of things (IoT) devices, and big data analysis.

Meanwhile, the introduction of next-generation 5G mobile networks will open up a whole new world of internet connectivity, speed, and capacity. China’s “Internet Plus” strategy introduced in March 2015, seeks to integrate the mobile internet, cloud computing, big data, and IoT applications to modernize industries and manufacturing.

China has the biggest internet population in the world with around 829 million users – generating a huge amount of data that needs to be stored securely and analyzed for insights in a cost-effective manner – hence the need for greater cloud capacity and services.

To be sure, China’s USD 2.3 billion market size is still relatively small compared with the USD 26.3 billion global market that is dominated by Amazon Web Services, Microsoft Azure and Google Cloud. Alibaba ranks fourth in the global market with a 4.6% share in the second quarter of 2019, according to another report by Canalys.

“Moving forward, what our business partners want is not just cloud storage and elastic computing power, but capabilities that can help them become future giants,” Lancelot Guo, Alibaba vice-president, said in May at the company’s cloud summit in Beijing.

Alibaba owns the South China Morning Post.

This article first appeared on the South China Morning Post.