Alibaba Group Holding Ltd Launches Its First US Cloud Center

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Alibaba is opening its first cloud computing center in California on Wednesday. The new Silicon Valley cloud center underscores the Chinese e-commerce giant’s global ambitions. The hotly contested U.S. cloud market is currently dominated by Amazon Web Services, Google and Microsoft. Ethan Yu, VP at Alibaba’s Aliyun cloud unit, did not reveal the location of the cloud data center due to security reasons.

Alibaba to initially target Chinese firms with U.S. presence

Yu told John Ruwitch of Reuters that the new data center will initially cater to the Chinese businesses that have operations in the United States. Aliyun will later target American companies with a presence in both countries. He declined to reveal how much Alibaba invested in the cloud center. Yu said international expansion was a company strategy, and Alibaba may expand to other regions of the U.S.

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Aliyun claims to have 1.4 million cloud services customers in China. The Hangzhou-based company has four cloud centers in China and one in Hong Kong. Alibaba also plans to expand its cloud reach to Southeast Asia and Europe by the end of this year. Aliyun was initially Alibaba’s in-house technical infrastructure, but it later started offering storage and processing space to small and mid-size Internet businesses in China.

Alibaba has big plans for Aliyun

Aliyun holds only 23% share in the Chinese cloud services market. It faces competition from both Chinese and U.S. rivals. Alibaba said its services in the U.S. will be “cost competitive,” without revealing specific price points. American cloud giants such as Amazon Web Services, Google, Microsoft and others have aggressively slashed prices to sustain rapid growth.

The cloud services market is estimated to grow to $107 billion by 2017, according to IDC. U.S. clients are unlikely to be bothered by Aliyun’s Chinese ownership if Alibaba offers competitive prices. The Hangzhou-based company has ambitious plans for Aliyun, which currently accounts for just 1% of Alibaba’s total revenue. Alibaba says cloud computing is key to its plans to aggregate and analyze huge amounts of data, including on consumer behavior.

Alibaba shares fell 0.75% to $80.97 in pre-market trading Wednesday.