The industry believes that 2020 to 2030 will be the digital decade for Southeast Asia,” says Zhang Yi, research analyst at tech forecaster Canalys. “During this period, the digital economy will usher in explosive growth.”
Zhang tells China’s All Weather TMT, a tech-focused media outlet that “this is a potential growth opportunity that cannot be missed for domestic firms”.
And so far, that has certainly proven the case thanks to the way that China’s Digital Silk Road is weaving its way across the region.
Tech consultancies have different market share estimates for cloud service providers in Southeast Asia. But one thing they do agree on is that Alibaba has broken into the top three grouping there in ways that it has not managed across the rest of the world (outside of China, of course).
The US-based consultancy Synergy Research estimates that globally (ex-China), Amazon Web Services (AWS) reigned supreme during the first quarter of 2022 with a 33% market share across IaaS, PaaS and hosted private cloud services combined. Microsoft came second on 22%, followed by Google in third place on 10%.
When it comes to Asia-Pacific, Gartner calculates Alibaba has a leading 25.5% market share in the IaaS segment and 9.55% globally. Cloud computing has now become the group’s second biggest overall revenue driver and turned profitable on an EBITDA basis for the first time in the past financial year.
Along with Lazada, Alibaba’s Southeast Asian e-commerce unit, its cloud service was a bright spot at a time of declining growth rates across its dominant e-commerce operations in China. Cloud accounted for 9.2% of Alibaba’s overall revenues last year and company executives say that Southeast Asia will be a focus for future revenue growth.
There are plenty of research reports suggesting why this makes strategic sense, aside from the need to diversify away from its home market. One such study, conducted by Google alongside Bain and Singapore’s Temasek, concluded that internet penetration across Southeast Asia rose from 70% to 75% last year. IDC Cloud says that the region is the world’s fastest adopter of cloud computing, forecasting a market worth $40.32 billion by 2025.
At the end of last year, Zhang Jianfeng, president of Alibaba’s cloud division, explained why Southeast Asia is such an obvious target, citing the cultural overlap with the Chinese market in terms of customers’ needs and habits.
Last summer, the division launched its Project AsiaForward initiative, setting aside $1 billion to upskill about 100,000 Southeast Asian IT developers and a similar number of tech start-ups.
Alibaba launched its international cloud division in 2015 and it followed a familiar trajectory, initially servicing Chinese companies with an overseas presence before broadening out to non-Chinese companies operating in similar sectors to its own, e-commerce.
Tencent followed a year later in 2016 with an initial focus on companies in the gaming and entertainment sectors.
Both companies have rapidly expanded their data centre footprints across the region, as has Huawei, which is currently ranked above Tencent in global market share. In 2021, Alibaba opened its third data centre in Indonesia and its first in the Philippines. This March it opened its first facility in South Korea, followed by its first in Thailand last month.
Alibaba now operates across 84 ‘availability zones’ in 27 regions around the world with more coverage set to follow.
The sector is also helping to cement ever-closer Sino-Saudi ties. This year sees the launch of Alibaba’s first cloud joint venture with the Saudi Telecom Group, the kingdom’s biggest mobile operator.
One of the biggest issues for governments faced with the Sino-US geopolitical divide is how to keep data secure from spying and from malign service disruptions.
This January, Reuters reported that Washington has launched a formal review into Alibaba’s US cloud business to determine whether it poses a national security risk, for instance.
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