John Pientka

Have you Heard? The Chinese Cloud Is Coming!

Alibaba challenges Amazon

Alibaba challenges Amazon in the Cloud marketplace!” Analysts are almost breathless in their commentary. What’s the real story? Think there are no implications for you? Would you put your data in a Chinese Cloud?

On almost every front we read that China is increasingly encroaching on American leadership. Whether it’s the increasing tensions in the South China Sea, or the grand investments in China’s New Silk Road, or its expansions into Africa and Latin America the drumbeat is incessant. Well, we can now also include the hottest technology – cloud.

Alibaba, the Chinese conglomerate of online commerce and payment solutions, recently announced some very good financial results with a 56% rise in first quarter revenues to 50.1 billion yuan ($7.51 billion) for the three months ended June 30, compared with analysts’ average estimate of 47.7 billion yuan. But what really got the buzz going were the results disclosed around its cloud-computing unit, AliCloud (also know as Aliyun).

In the cloud business, revenue grew 96 percent in the quarter to 2.4 billion yuan ($359 million), with total paying customers breaking the 1 million mark for the first time, up from 577,000 a year earlier. In addition, total global data centers grew to 17 during the first quarter, with the addition of two centers in India and Indonesia.

Compared to Amazon Web Services (AWS) recent quarterly results of $4.1billion in quarterly revenue and $916 million in profits AliCloud is still pretty small fry. Morgan Stanley expects AWS and Microsoft to remain the leading cloud players with Amazon raking in $47 billion and Microsoft $35 billion in cloud revenue by 2020. But Alibaba is expected to gain the most market share from now until 2020, growing to $10 billion. This will move them up to 5th place in the market from their current position as number 10.

All well and good, but why should you care? First, AliCloud’s ambitions are truly global. Currently, three of their data centers are in the U.S. (one in Virginia and two in Silicon Valley). Second, a lot of observers have commented on how AliCloud seems to parallel what Amazon did with AWS. Recall AWS reduced prices scores of times in its history. As AliCloud reaches for share there is a good chance we’ll be looking at some interesting price competition from them. Last, do you do business outside the U.S. especially in Southeast Asia or China? What’s not to like? Low prices and the right geographical deployment could be very attractive.

Then again, China has different perspectives on security and intellectual property (IP). Their recent moves to squash VPN’s (Virtual Private Networks) that allow users to tunnel through the Great Firewall indicate the security services want to see everything. That extends to communications you have with any cloud in China. AWS just had to tell its Chinese users that they could not use VPN’s to AWS locations in China.

Then there is IP. China has a voracious appetite for Western Intellectual Property and they are not shy about outright stealing it. Storing your blueprints, formulas and methodologies in AliCloud feels kind of risky.

Maybe it was always meant to work out this way. The Internet and Cloud started as an American offering with our cultural respect for contracts and property, but otherwise with a capitalist laissez-faire, “let it rip” attitude. Today we see a splintering of those initial rules with Europe insisting upon much stricter control of personal information including that held in U.S. Clouds through the GPDR (General Protection Data Regulation).

China, with one of the worlds largest market, economies and very distinct culture was bound to forge its own path. You have to wonder what other ones will emerge? As India continues its blistering economic growth will there be demands for an “Indian Cloud”? What rules will reach back into the U.S. as the GPDR does?

What cloud should you use? Are you in compliance with the national rules of the countries and regions you serve? Are you secure? Your choices keep expanding. Looking for cheap storage for you data? You can always try another new offering – there is a hell of a new cloud data center going into Irkutsk. With plenty of cheap hydroelectric power and the natural year round cooling of the Siberian climate, this promises to be a real winner in cost-effectiveness. Of course, it is in Russia.

By John Pientka

John Pientka

John is currently the principal of Pientka and Associates which specializes in IT and Cloud Computing.

Over the years John has been vice president at CGI Federal, where he lead their cloud computing division. He founded and served as CEO of GigEpath, which provided communication solutions to major corporations. He has also served as president of British Telecom’s outsourcing arm Syncordia, vice president and general manager of a division at Motorola.

John has earned his M.B.A. from Harvard University as well as a bachelor’s degree from the State University in Buffalo, New York.

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