Alibaba’s cloud computing unit, otherwise known as Alibaba Cloud or Aliyun, has decided to cease data center operations in India and Australia.
“As part of Alibaba Cloud’s infrastructure strategy update, following careful assessment, we have decided to cease operations at our data centers in Australia and India while enhancing our investment in the Southeast Asia and Mexico,” a notice shared by the company on its portal read.
The data centers in these two countries, located in Mumbai and Sydney, are expected to shut by July and September respectively. While the Mumbai data centers will cease operations by July 15, Australian data centers will become inactive after September 30.
The company, as per the notice, said it has “issued multiple rounds of notifications and technical migration plans to affected customers since December 2023.”
Further, Alibaba has asked affected customers to migrate their data to the Singapore region or any other region as soon as possible.
While an email sent to Alibaba seeking clarification on whether these migrations will incur charges went unanswered, analysts said the company is unlikely to charge customers for the migration.
An email query seeking the rationale for closing the data centers in the two countries also went unanswered.
Geopolitical tensions and growth concerns
The decision to shut operations in the two countries could be linked to Alibaba’s cloud business growth challenges in the two countries and geopolitical tensions.
“Alibaba is closing its operations in these two countries as they see limited business opportunities in these markets for their company,” said IDC Associate Research Director, Rajiv Ranjan.
Limited scope for generating more business in these countries can be attributed to several factors, including market maturity, Ranjan said.
“The Australian market is very mature on cloud adoption and AWS, Google, and Azure have a strong presence. Carving out a decent market share would be difficult with limited operations and customer base,” Ranjan said, adding that Alibaba’s limited operations are reflected in the size of its data centers.
In contrast to the company’s practice of deploying large data centers, its data center in Australia is a colocation facility, Ranjan explained, adding that it was the same for India where the company has two availability zones in Mumbai that are of limited size.
“On the other hand, India is fast growing on public cloud services but again is dominated by Azure and AWS with Google and Oracle increasing its presence quite aggressively, which makes things relatively difficult for Alibaba,” Ranjan said.
Both markets do not favor using Chinese brands, especially India, whose relations with China have not improved in the last few years, Jain explained.
Alibaba’s renewed focus on Southeast Asia and Mexico
Alibaba Cloud’s decision to focus its investment in Southeast Asia and Mexico is justified and logical, according to analysts.
“Alibaba has a stronger brand presence in Southeast Asia through their ecommerce business. Hence, they have decided to focus there,” Ranjan said.
Explaining further, Ranjan added that Alibaba had ramped up their data center investment in India by deploying their second availability zone in 2022 due to the data localization policy.
The company’s strategy, according to Ranjan, was to leverage the investment to acquire as many customers as possible.
“Some of their customers in India are Paytm (their largest customer) Oppo, Vivo, DLF, and Reliance Entertainment. However, the presence of hyperscalers impacted their growth plans,” Ranjan said.
In April, Alibaba Cloud reduced the price of some its public cloud products deployed in non-Mainland China regions by up to 59%.
Analysts saw this as a strategy to undercut competition from larger hyperscalers in markets, such as South Korea, Indonesia, Hong Kong, Singapore, Malaysia, Philippines, Thailand, Japan, the US, Germany, the UK, and the UAE.
Azure, AWS set to gain
The migration to a different cloud provider will result in additional investment for enterprises moving out of Alibaba Cloud, according to Charlie Dai, Forrester’s principal analyst.
Despite this, customers are likely to move to other cloud providers as they may not be comfortable shifting data outside their country, analysts said.
“Mostly Azure and AWS are expected to gain the customers moving out of Alibaba Cloud. If it’s IaaS, AWS will benefit as it has a strong 60% market share in India IaaS space,” Ranjan said.
However, the analyst pointed out that Google or Oracle might gain some price-sensitive customers as their pricing is more in line with the pricing that Alibaba Cloud offers.
“Azure and AWS might seem a bit premium for these customers. Azure anyways has increased its prices recently in the first half of 2024,” Ranjan added.
Source:: Network World