In the age of cloud computing, which has witnessed tremendous growth as people and businesses seek safer storages and artificial intelligence-powered services, companies in the market, old and new, are working to secure market shares.
When it comes to cloud, Google, Microsoft and Amazon Web Services (AWS) reign supreme. But a horde of other players in the market are revving up to wrestle some users off from the dominant companies or win fresh users by offering peculiar cloud services.
On Tuesday, Chinese e-commerce giant Alibaba launched a new server chip, pushing to stage competition against US Amazon. The processor, called Yitian 710, is based on architecture from British semiconductor firm Arm and some latest manufacturing processes. It will go into new servers called Panjiu.
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The servers are designed for artificial intelligence applications and storage, but will not be directly sold to customers. Alibaba’s cloud computing customers are instead expected to buy services based on these latest technologies.
Covid-19 ignited an unprecedented shift to digital life, opening opportunity for expansion in Internet of Things (IoT) and AI, and companies are seizing it.
Backblaze, a company that backs up data on people’s computers and provides cloud-based storage space that companies use to store and retrieve files, filed to go public on the Nasdaq on Monday. It is one of the small players in the cloud computing industry, but has witnessed massive growth since the outbreak of coronavirus.
Backblaze, which was founded in 2007, was offering online backup services for PCs running Apple’s MacOS and Microsoft Windows until 2016, when it shifted to object storage.
Although the company has been up against some of the world’s largest companies, including Amazon, Google and Microsoft, which offer cloud computing services to companies, schools and governments, it has grown from the shadows of the big names by carving out a niche.
“The market is demanding alternatives to the traditional, diversified public cloud vendors for multiple reasons,” Backblaze said in its IPO prospectus. “These public cloud vendors have increasingly focused on the largest enterprises, resulting in significant complexity in their products and pricing that leaves behind mid-market businesses.”
For Backblaze, the year has been amazing. Per CNBC, B2 revenue saw a record growth of over 60% year over year in the first half of 2021, while the online backup business grew 12% during the same period. Plus, existing customers more consistently stick with B2 than with backup, and B2 has higher annual average revenue per user.
If Backblaze completes its initial public offering, it would join DigitalOcean in providing cloud capabilities to smaller businesses.
Alibaba and Backblaze are towing the niche path to survive the dominance of Amazon, Google and Microsoft in the cloud computing arena. Alibaba will not be manufacturing the semiconductor but will be designing it. But the e-commerce giant did not disclose when the latest chip and server services will be available.
Besides carving out a niche in China
For Chinese companies in the cloud computing market, the niche strategy means more than winning market share. Following Huawei’s US sanctions, the push to develop homegrown chips has been on high, with many Chinese companies developing their own.
Backed by the Chinese government, Huawei leads the trend. The telecom vendor, currently grappling with the impact of US sanctions, which have limited it from leading 5G roll out globally and producing enough smartphones to meet its consumers demand, has designed its own chips.
Earlier this year, another Chinese company, Baidu raised money to pursue a standalone semiconductor business. The companies’ efforts have been backed by the government that is keen to eliminate its tech industry’s dependence on foreign chips.
However, Alibaba is China’s largest cloud computing player, according to market analyst firm Canalys. Besides seeing it as a key part of its future growth, the company believes developing its own will boost its efficiency.
“Customizing our own server chips is consistent with our ongoing efforts toward boosting our computing capabilities with better performance and improved energy efficiency,” Jeff Zhang, president of Alibaba Cloud Intelligence, said in a press release.
Cloud computing currently accounts for 8% of Alibaba’s total revenue as it works to expand internationally to markets dominated by US rivals. Cloud service providers in the US are also increasingly moving to establish standalone operations.
But for Alibaba and other Chinese companies, the push for cloud computing is also a new way of receiving the blessing of the authorities. The recent government’s crackdown on China’s tech industry that has affected many of the big players, resulting in intense scrutiny, is instigating a move into the line of businesses that will have government’s support.
In April, Alibaba was slapped with a $2.8 billion fine as a result of an antitrust investigation into the company’s activities. So many others have also been indicted and punished for various antitrust offences. The companies are now operating in line with government’s body language.