In 2017, cloud computing market continued to rage on. The outcome of the war between Alibaba Cloud and Amazon AWS still remained to be seen, and Baidu Cloud and Tencent Cloud participated in the competition as well. Meanwhile, NetEase started to pay more attention to its NetEase Cloud; Huawei Cloud even officially announced it would start war with Alibaba Cloud. Carriers and other IT vendors also gradually took root in their own subdivisions. More dreadfully, China Merchants Bank (CMBC) also strived to develop its cloud services. Cloud computing now has become a lucrative market where everyone wants to step in.
Although there are many players in the cloud computing market, there is one main line that IoT cloud services represented by Alibaba Cloud and traditional IT vendor represented by Huawei are confronting directly, while those international giants are flanking on the side.
Three Big Events
During 2017, there are three big events in China cloud computing market, which can particularly present today’s competition pattern in the area of cloud computing. They are:
- In 2017 April, Huawei officially announced that it started to power public cloud market, and set up secondary department named Cloud BU for its cloud business. In August, Cloud BU upgraded to first-level department having larger decision-making power. It was rumored that Huawei Cloud ever mentioned a development goal of surpassing Alibaba Cloud within 3 years.
- In 2017 March, Tencent Cloud won the bidding of the private cloud platform for Xiamen government outward network which is estimated to spend RMB 4.95 million for 1 penny only. At that time, there were five companies in all participating in the bid, including Tencent Cloud, China Mobile’s Fujian Company, China Telecom’s Xiamen Company, China Unicom Cloud Data, and Xiamen Zongheng Company. Finally, Tencent Won.
- The third event is about Amazon’s AWS. In 2017, AWS announced that it opened second cloud region operated by Ningxia Xiyun Data, and the Chinese company also provides AWS to customers. The price of AWS instances in Ningxia regions is 40% lower than the instances in AWS’ Beijing region. The outside believed that it could cause other cloud vendors cut their cloud service prices again, and even a new round of price war.
Why does the industry think the three events are the symbolic events in 2017? The participants of these events can mostly be on behalf of the major giants in China market, and their competition strategies: Alibaba Cloud is the only one true superpower, Tencent is the second titan, Huawei is China’s IT industry leader, and AWD is the giant overseas.
In 2017 December, IDC ever published the China public cloud IaaS market share research result in the first half of 2017. In it, Alibaba Cloud’s market share increased 7 percent comparing 2016, and its market share was increased by 47.6 percent.
In domestic market, Alibaba Cloud is a real strongest power, but it still has many challengers.
AWS grows in China more and more rapidly, because it only cut down its cloud service prices again, but also its AWS cloud services are compliant with China’s regulation and policy. During the recent 2 years, AWS indeed lost part of market, but the company still continues to increase investments, and the lower pricing strategy shows its ambition in Chinese market. In China cloud computing market, especially the public cloud market, Amazon’s AWS is and will be the uncertain factor.
Tencent, an up-rising star, is confronting with the market with fierce competition. It is using extreme methods to game, and it brings uncertain factor, too. Meanwhile, the top 2 to 5 cloud vendors occupied market share of 9.6 percent, 6.5 percent, 6 percent, and 5.5 percent respectively. Tencent Cloud was the number 2, having 9.6 percent of market share, and it was the third one year ago.
Traditional IT vendors like Huawei and China Telecom carriers’ cloud services are still competitive. They are tried to challenge Alibaba Cloud’s Number one place. In the early of 2017, it even announced that its public cloud would surpass Alibaba Cloud and become the number one China cloud computing market. It aims at becoming one of the first giants during the future 5 years.
Seeing these big events, it is evident to figure out several market trends, and we list them in below:
- The price war in domestic cloud computing market is intense, and those cloud computing giants event provides free service to fight for large market share. In fact, initially Alibaba Cloud also offered free service in the collaboration with Railway 12306 website.
- The competition in the sear of IaaS is nearly cutthroat. There are some vendors has only one object that if I cannot obtain earnings, then other cannot either. Alibaba Cloud president Hu Xiaoming ever said that he can’t agree with Tencent Cloud’s super-low bidding price strategy and he also commented on it that Tencent Cloud’s action was very irresponsible for the cloud computing market.
- Carriers are cultivating market segment. CMCB started to develop financial cloud services means cloud service market still has profitable places in many subdivisions. These companies take more service scenario into consideration.
Public cloud service essentially belongs to Internet business, which follows the features that giants are always giants and winners take all. The competition in the public cloud market now is really fierce.
In the end of March 2017, Alibaba Cloud ever officially launched that it completed the integration of YouKu CDN, while it offered 35 percent of discount; on December 22, Alibaba Cloud provided 25 percent of discount on its CDN again. In the end of December, Tencent completely adjusted its CDN pricing tables with up to 44% off, and then its CDN is billed according to flow.
Looking at these pricing strategies, it is clearly that those small players in the market cannot follow the steps because of the shortage of fund. So, in the future public cloud market, they will hardly survive. However, in the areas of subdivision scenarios and market segment, they will probably have relatively considerable market room to develop.
Typically, along with the explosion and maturity of enterprise-class application market, the requirements of subdividing, crossing layers, efficiency, collaboration between SaaS applications will be higher and higher. The importance of PaaS will increase sharply. How to deal with specific problems will be considered by more users.
MBCloud offers various cloud services for finance including finance cloud disaster recovery, finance cloud application supervisory control, finance cloud security, and finance cloud operation and maintenance.
At an early stage, MBCloud mainly provides these finance cloud services to small and medium traditional banks, and in the future it aims at covering all financial industries and offering cloud service to extensive financial organizations. Compared with those public cloud giants, these professional finance cloud service providers can offers more professional finance cloud services.
As an Internet cloud provider, NetEase has different development road from those titans who plan to connect to everything and cover all industries. NetEase put forward the strategy of scenarized cloud services, which is very similar to CMCB and CIB starting offering cloud services.
NetEase Cloud does not classify cloud services into traditional types such as IaaS, PaaS, and SaaS, but offers cloud services according from levels of basic services, product research and development, and business operation, to solve the business demands in specific scenarios.
Starting from minor subdivisions, small and medium cloud services providers can avoid Alibaba Cloud, AWS and Tencent Cloud’s price war, and has more energy to research products and offers better services. In current cloud computing market, it is a smart way for them.
Predictions of Future Trends
Compared with 2016, 2017 cloud computing market competition is more intense, and it can only be fiercer in 2018. There are three predictions about 2018 cloud computing market trends.
- Alibaba Cloud, Tencent Cloud and AWS will continue price ware and fight in all aspects.
Especially, Tencent Cloud has opened la big door for price ware in cloud computing market, and it has good cash flow. It is conducive to expand its own finance and game business by increasing investment in public cloud field. AWS has ambition in China cloud computing market, so it is inevitable to participate in the price war.
- Second-line cloud computing vendors like Tencent Cloud and Huawei Cloud will continue to Chase after top-line players.
Since Tencent included Tencent Cloud business into its financial report, it has kept more than 200% increase data containing payment data. Tencent Cloud has become the fastest-growing business among all units. If second-line vendors are willing to invest capital, it will be certain to occupy traditional vendors’ market share.
Huawei Cloud, however, still continues to avoid direct competition with Internet companies. By far, Huawei Cloud has launched tens of cloud services including the enterprise-class cloud solutions for manufacturing digital transformation and SAP. Obviously, it is different from Alibaba Cloud and Tencent Cloud.
- SaaS market and vertical market segments will appear cloud computing little giants.
Internet giants did not do very good jobs in those specific fields because they mostly focus on IaaS, and small cloud service companies have no solid technical strength in these areas either. However, it is really a good chance for those Internet cloud computing providers to catch up.
According to the latest IDC’s China Public Cloud Service Market Semi-Annual Tracking Report, in the first half of the year 2017, China public cloud SaaS market size reached $540 million, with year-on-year growth of 34.5 percent. China SaaS market now is in the initial stage, developing at top speed.
IDC predicted that the CAGR from 2017 to 2021 China SaaS market will exceed 40%. In the next three to five years, China SaaS products will further develop towards vertical type. Enterprise-class SaaS universal vendors will increase specific industries’ custom services, and vertical industry segmentations will constantly appear new SaaS vendors as well.