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Alibaba cloud mulls global push while trouncing Amazon at home

(Bloomberg) --Alibaba Group Holding Ltd.’s $3 billion cloud services arm is fast becoming an important driver of its global expansion.

The e-commerce giant widened its lead over Amazon.com Inc. and Microsoft Corp. in Asia’s cloud computing market in 2018, according to Gartner, which in turn helped it narrow its global gap with those two rivals. That’s helping Alibaba advance billionaire co-founder Jack Ma’s vision of earning half its revenue beyond China.

Alibaba’s overseas cloud expansion will continue to outpace its domestic growth as the company pushes further into other countries, according to Lancelot Guo, Alibaba Cloud’s vice president and head of strategy. “Internationalization is a key strategy for Alibaba and cloud,” Guo said in a phone interview. “We want to grow even faster.”

The company declined to disclose its budget or revenue target. Guo said it seeks to cater to U.S. companies investing in China and vice versa, and that setting up data centers in Indonesia and Malaysia will help it comply with local data requirements.

The cloud business underpins Alibaba’s revenue growth, helping it offset saturation in its home e-commerce arena. The overall cloud market could grow by 55 percent to $331.2 billion in three years, according to Gartner, and Alibaba’s cloud business has been generating triple-digit revenue growth over the past three years, outpacing the industry.

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An attendee walks through a display booth for Aliyun, Alibaba Group Holding Ltd.'s cloud computing unit, at Alibaba's annual November 11 Singles' Day online shopping event in Shenzhen, China, on Friday, Nov. 11, 2016. Alibaba broke its $14 billion Singles' Day sales record with room to spare, offering assurances about the strength of the Chinese consumer despite the nation's economic slowdown. Photographer: Qilai Shen/Bloomberg

Gartner estimates that Alibaba last year accounted for 19.6 percent of the Asia region’s markets for infrastructure as a service and infrastructure utility services, two of the most popular forms of cloud business. That means its regional market share rose by nearly a third from 2017, while Amazon’s fell slightly to 11 percent. (Globally, Amazon leads with 30.4 percent to Alibaba’s 4.9 percent.)

It’s been a tumultuous year for global tech operators as the U.S., Europe and countries across Southeast Asia tighten their grip on data services. Vietnam and Thailand are among the nations warming to a stricter model of governance than tech companies have been accustomed to in the internet era.

That’s one reason to invest in local data centers. Alibaba has 15 such facilities in Asia excluding China, including Hong Kong, Australia, India and Japan. “We are very, very sensitive and aware,” said Guo. “We work with a lot of third parties to understand each country’s laws.”