China’s Alibaba Establishes Fund to Develop Ecosystem in Support of Cloud OS

China’s Alibaba Establishes Fund to Develop Ecosystem in Support of Cloud OS

The iPhone is the defining consumer product of the 2000s. In addition to its sleek design and captivating functionality, one of the major reasons it reached such heights of popularity was the creation of an ecosystem of third-part applications that greatly enhanced what value an iPhone could deliver. These iPhone Apps, as they came to be called, developed into a USP for the product itself.

This phenomenon of an ecosystem encouraging adoption of a product or technology is not new. Consider the VHS-Betamax War of the 1970s fought between Japanese electronics giants JVC and Sony who sought to have their competing video cassette recording standards become the industry standard. Although most experts agreed that Betamax delivered better quality, it was VHS which won out because JVC managed to convince more companies to fight on their side. Not many know this, but manufacturers of pornography also played a key role here, especially as Sony barred them from using its Betamax technology.

The same scenario played out 30 years later when Blu-ray and HD DVD competed to be the industry standard for DVDs. Since Blu-ray, unlike HD DVD, allowed region coding that prevented discs bought in one region to be played in machines bought in another region, the technology allowed major studios greater control over their products. Consequently, Blu-ray was favored by the studios and came out the winner.

In this light, it is no surprise that companies developing cloud-based products have adopted a similar approach. Last week I wrote about how Box.net, a relatively new entrant in the cloud computing market, is investing in the Box Innovation Network to encourage innovation in the field (See: Can Box.net Overtake Microsoft SharePoint?). The belief is that such innovation will end up helping Box.net and its customers as well.

Now, leading Chinese e-commerce company Alibaba, which had recently developed a cloud operating system (OS) (See: The New Chinese Cloud OS), has announced the creation of a 1 billion Yuan $157 million) fund to invest in cloud computing businesses and developers building apps for its Aliyun OS. Private equity firm Yunfeng Capital, in which Alibaba Group Chairman Jack Ma is a major investor, is also investing in the fund.

While the Aliyun OS can run Google Android apps, the company wants to build more of its own cloud apps that work by accessing Alibaba’s e-commerce service over the Internet. In addition to this fund, Alibaba also announced a 1 million Yuan ($157,000) competition to encourage developers to build the best cloud apps for the Aliyun OS. The competition runs until the end of the year.

With the Aliyun OS being developed specifically for mobile devices like phones and tablets like the iPhone and iPad, Alibaba seems to be emulating Apple’s example in the development of an app ecosystem as well, in order to make optimum use of the technology and increase adoption.

By Sourya Biswas

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