Amazon Web Services better watch its back. And while we’re at it, let’s issue a warning to Microsoft and Google and just about any cloud service you can think of, because there is a new player in town and they have a lot going for them including being based in China and oh, getting a record-setting IPO last Friday that resulted in raising a whopping $25B.
That kind of money gives you some serious clout, and let’s face it even before the IPO, Alibaba was beginning to flex its considerable muscles. We already know Alibaba is a big player in Chinese online shopping and we know it has set its sights on cloud computing. Just recently it opened up its fifth data center, this one in Shenzhen. Heck, it’s even got its fingers in banking. With $25B in additional funds, it can do just about whatever it wants.
For the sake of argument, let’s concentrate on cloud computing, especially the infrastructure as a service market. Up until now Alibaba has been big in China, which is not to be minimized of course. China, as we know, is a huge market, one every US vendor salivates for because even a small piece adds up to some serious revenue.
With its new-found money though, Alibaba will very likely turn its eyes toward the rest of the world. Certainly from a cloud infrastructure perspective that means another mega player to add to AWS, Google Cloud and Microsoft Azure. Right now AWS is clearly the big dawg, but with the money it raised last week, Alibaba could begin building data centers on these shores and in western Europe too and begin to take on the big US cloud infrastructure players.
It’s hard to know what the implications will be. They have to prove they are reliable. They have to compete on services and of course they have to compete on prices, which has been plunging as the big players fight to get the attention of the lucrative enterprise markets. Nobody wins when the price plunges towards zero (except the consumer), but if anyone can afford to take a big shot on price right now, it’s Alibaba.
For the smaller players, it probably is just another nail in the coffin. Recently Rackspace found itself between a rock and a pricing hard place and quit the commodity infrastructure service business because they couldn’t deal with the price wars going down between Amazon, Google and Microsoft. Can you imagine if a fourth giant were to enter the market? It would force even greater downward price pressure and only these four giants could afford to duke it out because they have enough cash and make enough money from other parts of their businesses to take a loss on the infrastructure piece.
Meanwhile, we have OpenStack trying to attack these players from underneath as an open source, private cloud alternative to these big public players. Alibaba could take a bite out of AWS’s marketshare, but it might be a case of meet the new boss, same as the old boss from the perspective of those trying to fight the big public cloud players. The fact is Alibaba will very likely be no different from the other players and that won’t change the reason that OpenStack developed in the first place, as open source alternative to big public clouds.
Of course, it’s not as though OpenStack doesn’t have some big players of its own behind it. HP has suddenly emerged as the biggest contributor to OpenStack. Just yesterday, Red Hat made it clear it was going all in on OpenStack and the cloud. These companies and others including IBM want to attract customers that are reluctant to deal with the public cloud and Alibaba stepping into the market isn’t likely to change that.
Regardless, the big news is Alibaba’s newly found riches and while it might give more fuel to OpenStack supporters, it should certainly make the big cloud infrastructure service providers stand up and take notice because there is a new powerhouse in town –and the big 3 better watch their marketshare.