Alibaba Group Holding on Monday said that it will pump in $28 billion (200 billion yuan) in its cloud computing division over the next three years as the company sees immense potential in the area. The decision comes after the company witnessed a boom in demand for business software after the coronavirus outbreak escalated in China.
Alibaba sees cloud computing as an integral area to its e-commerce growth in the future. Alibaba's cloud developing is one of its fastest growing businesses, with the company commanding almost 50% of China's cloud market in the fourth quarter of 2019. China boasts quite a few big players in the cloud computing market, which has growing rapidly post the coronavirus outbreak.
Alibaba plans to grab bigger market share
Alibaba in a statement said that it will invest $28 billion in technologies and infrastructure related to servers, operating systems, chips and networks. The company also plans to build its own data center infrastructure. The company said that it faced huge pressure when the coronavirus pandemic peaked.
Alibaba witnessed a surge in usage of its software, especially DingTalk, a chat app used at both schools and businesses, as an increasing number if people worked from home and remained quarantined. However, the company received large number of complains as the app at times used to get slow owing to the high volume of activity.
Alibaba also acknowledged the issues. The decision to expand its cloud business comes as a result of this. Alibaba's president of Cloud Intelligence, Jeff Zhang, said that the Covid-19 pandemic put additional stress on the company but the investment will allow the company "speed up the recovery process."
Alibaba to focus more on cloud business
Alibaba is one of the biggest players in the cloud market in China. The company commanded 46.4% of the country's cloud market in the fourth quarter, according to research firm Canalys. However, despite its international push, Alibaba still lags global players like Amazon and Microsoft.
Moreover, despite enjoying a huge market share in China, cloud business accounts for only 7% of Alibaba's total revenues. That said, the company sees it as a critical area in the future. The company's latest efforts could allow Alibaba not only expand its international customers and product base but also compete with the likes of Microsoft and Amazon.
However, Alibaba also has been facing competition in China from the likes of Baidu Cloud, JD.com and Tencent Cloud. Baidu and Tencent command 8.8% and 18% market share, respectively.