Can Alibaba Cloud crack the Indian market?

Alibaba’s announcement of setting up a cloud datacenter in Mumbai next year is all set to add to the cut-throat competition in the already competitive cloud computing space.

Gartner predicts that the cloud business in India is expected to grow at a CAGR of 30.6 percent between 2016 and 2021, and is currently dominated by top-rung players like Microsoft, AWS, Google, and Oracle.

A tête-à-tête with tech leaders brings forth their expectations and reservations around the Chinese giant’s entry into the market.

Highlighting Alibaba’s cloud computing prowess, DD Mishra, Research Director at Gartner points out that Alibaba Cloud is the current market share leader for cloud Infrastructure as a Service (IaaS) in China, and performs particularly well with Chinese digital businesses and agencies within the Chinese government.

“Alibaba Group has the financial wherewithal to continue investing in new regions, engineering efforts, and regional sales and marketing for Alibaba Cloud,” says Mishra.

Alibaba could make a killing in the SME space, and channels can get them there

The enterprise is already teeming with established cloud service providers. So, it’s imperative for Alibaba to devise a strategy and target a segment that could give tough competition to existing players in the market.

Paresh Shah, CEO at Allied Digital Services believes that in India there are two types of cloud providers: One includes the established brands like AWS and IBM. On the other hand, you have smaller companies like Netmagic. So he sees it as a strategic move by bringing together brand and low cost capabilities. Now this could help channel partners offer a whole new array of solutions.

Additionally, he believes that it’s important for Alibaba to set up its own brand. The company needs to earn the trust factor, and this is a long-drawn process.

Punit Thakkar, Director and CEO of Shivaami Cloud Services believes that the key to Alibaba’s success in India rests on getting its channel partners and customers on board.

“Right now, Alibaba doesn’t have any presence in the Indian marketplace. So the first thing they need to do is to build confidence among the Indian enterprises. In order to do that, they’ll first need to get the partners on board and make them comfortable,” says Thakkar.

In addition to this, he believes that they also need to ensure that partners and customers get a hands-on understanding of how Alibaba Cloud works.

The way Alibaba could grow is by tapping into the smaller customers first. In India, the SMB space is growing pretty fast in terms of digital transformation. But not many cloud providers have been able to crack this segment, says Sunny Sharma, CEO and founder of Foetron.

Earlier this year, Alibaba declared that it would invest USD 177 million in Paytm. Now this move would put the company in direct competition with Amazon.

Shedding light on this development, Sharma says that this move could be harnessed as an immense business opportunity for the Chinese giant in India. “Alibaba, integrated with Paytm, could come up with an IP which would be more suited for the SMBs,” he says.

Sharma believes that one of the best ways to get SMBs, like retailers or manufacturers, on board is by powering their e-commerce. So if Alibaba launches a SaaS offering, with an e-commerce component built in, it will be able to crack a big market.

Now as Alibaba has expertise in terms of delivery as well, it can manage the entire back end for a retailer and get the entire ecosystem stitched in.

“I don’t see why large enterprises would want to partner with Alibaba. But I see SMBs going after Alibaba big time. This is where they can be a threat to anyone as SMBs are not oriented towards a particular brand or IP,” says Sharma.

What works in favor of Alibaba is the fact that it has a proven track record clubbed with a sound pricing model.

“Alibaba will definitely be able to make a dent into the market because of the skill they come with and the price they offer. It can give AWS and Google a run for their money. I don’t see Alibaba posing a threat to Microsoft, as Microsoft collaborates with larger enterprises; and multiple options are available for Microsoft clients,” says Thakkar.

Sounds great, but can we really trust the Chinese dragon?

Addressing the need for Alibaba to establish itself as a trustworthy service provider, DD Mishra, Gartner says that Alibaba needs to focus on the prospective international customer’s perception around security and regulatory compliance concerns when using a Chinese company, even though Alibaba Cloud has undergone third-party audits.

When asked about whether customers could have security and compliance issues stemming from reliance on a Chinese company, Shah says: “Government customers will never prefer anything coming from Alibaba Cloud. Then comes corporate customers – here’s where startups and the SME segment could get attracted. But larger corporates may not want to partner with Alibaba Cloud.”

Expressing his view on the trust factor, Shah says: “In today’s scenario, there are a lot of political challenges involved. So this is one of the drawbacks they will definitely face.”

Punit Thakkar, Shivaami Cloud Services, also shares this reservation. “At present, India and China do not share very good relations. So, customers can have their reservations around using Alibaba Cloud. This could have an impact on its business in India,” he says.

Sharma, however, is optimistic about Alibaba’s foray. “Alibaba is a global company, and people trust global companies. A lot of hardware being manufactured in China is selling well in India. Addressing security and compliance concerns is one thing Alibaba has to face, but I’m dead sure that they will be able to address it,” he says.