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24 May 2022

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Alibaba opens yet another data center in Europe, risking increased scrutiny

Alibaba Cloud is building its fifth European data center in Frankfurt, Germany. As competition in China intensifies, the Chinese giant is heavily focused on western markets. Alibaba now has three data centers in Germany, five data centers in Europe, and operates in 84 zones worldwide, covering 27 geographic regions.

2024 Olympic Games

Alibaba Cloud opened its first data center in Germany in 2016. Since then, the company has established local teams across Europe, including Germany, the United Kingdom, and France, and provides data storage, cloud computing, artificial intelligence (AI), and machine learning services to a variety of enterprise customers including Siemens, SAP, and Schneider Electric. Alibaba Cloud serves a variety of industries including automotive, manufacturing, retail, and gaming. Alibaba Cloud's Frankfurt node previously supported the global broadcast of the Tokyo Olympics and Beijing Winter Olympics. Alibaba Cloud will continue to provide broadcasting services for the 2024 Olympic Games in Paris.

Rapid growth

With the opening of its third German data center, Alibaba Cloud will provide more cloud computing products in Europe, not only to serve European enterprises, but also to provide cloud technology support for Chinese enterprises who intend to expand into Europe. In order to better tap into local markets, the company is promoting its partner program and recruiting partners and collaborators in several European countries.

Alibaba Cloud has achieved rapid growth overseas over recent years. Its overseas presence grew more than 10 times in the last three years, consistently ranking among the top cloud service providers in Asia Pacific. Western governments have taken notice. In the US, the Biden administration is reviewing Alibaba's cloud business to determine if it poses a threat to national security. Reuters reported that the probe focuses on how the company stores U.S. clients' data, including personal information and intellectual property, and whether the Chinese government might be able to access it.

Increased competition

Alibaba Cloud's expansion into international markets follows increased competition in China. The Chinese cloud market is booming. International Data Corporation (IDC) estimates that its public segment was worth USD 3.92 billion in the first quarter of 2020. The Infrastructure as a Service (IaaS) market has increased by 57% compared to a year ago, while the Platform as a Service (PaaS) market has increased by 64%.

China's public cloud market has been dominated by Alibaba Cloud for several years. During the first quarter of 2019, it owned more than 43% of the market, which was gained by leveraging its elastic computing, database, and cloud security services. The main competitors - cloud units of Tencent, Huawei, and Baidu - are also growing quickly.

Ten new hyper-scale facilities

In response, Alibaba has opened more data centers. The company also plans to build the largest data center cluster in China by constructing ten hyper-scale facilities. Tencent also started running its new hyper-scale data center in Qingyuan, Guangdong, this year. Additionally, Tencent Cloud has adopted an aggressive strategy to win big orders by contributing equity to its clients.

As a result, EqualOcean anticipates a price war. The consultancy says it's impossible to predict which company will win such a war, whether Alibaba Cloud will continue to grow, and how the Chinese cloud market will develop.

Photo credit: Gabriel Menchaca

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