Alibaba plans huge cloud investment

The Alibaba Group is planning to invest $1bn (£640m) in its cloud computing arm around the world to establish itself as a major rival to Amazon.

Alibaba says that the investment will see new data centres established in Japan, Europe and the Middle East. The company has already opened a new data centre in the US and is planning a second there. The funds will also be used to expand the company’s partner network.

Daniel Zhang, the chief executive officer of Alibaba, explained that the investment is just the start of the process. The aim is to make Aliyun, the cloud computing arm, one of the strongest in the world. At the present time most of the company’s customers are in China, with those outside China being Chinese companies with bases elsewhere.

Aliyun is faced with the challenge of attracting US customers who do not recognise the band name. Alibaba is bearing in mind the fact that it took 10 years for Amazon to reach its current position and is planning for Aliyun to grow over the next three or four years to reach a similar stage.

Amazon Web Services’ sales for the second quarter of this year reached $1.82bn, which is a rise of 81% on the same period last year, with the first quarter of the year seeing a rise of 49%. Amazon has reported an operating profit of $391m, more than five times the operating profit for last year.