Alibaba’s Cloud-Computing Unit To Open First Hong Kong Data Center

By Catherine Shu (@catherineshu)

Alibaba Group’s cloud computing unit, called Aliyun (or AliCloud), said today that its first data center in Hong Kong will launch on May 12. This is significant because it marks Aliyun’s first step toward international expansion. The announcement comes less than a week after Alibaba filed for its U.S. public offering, which is expected to be one of the largest tech IPOs ever.

It is important to note, however, that Aliyun does not look like it plans to expand into the U.S. Instead, the subsidiary is targeting Chinese businesses operating in the Greater China region and Southeast Asia.

As Alibaba explained in its announcement, Chinese companies that want to set up business outside mainland China usually need to add Web servers in local markets to handle additional traffic. This means that they have to deal with a new set of Internet regulations in each country. Renting Aliyun servers means that they will be able to sidestep regulations, lowering costs and barriers to entry. Aliyun already has three data centers in the mainland Chinese cities of Hangzhou, Qingdao, and Beijing. 

But Aliyun still faces fierce competition, most notably from Amazon Web Services, which recently launched in China. AWS China includes all the other services offered in other regions and marks Amazon’s first move into cloud computing services in the country. Its clients already include major tech players like Xiaomi, Qihoo 360, and Kingsoft, though it also targets small- to medium-sized businesses.

Furthermore, last October IBM and 21Vianet, the largest carrier-neutral Internet data center provider in in China, teamed up to provide data-computing services there.

Though many U.S. tech companies, including Google and Facebook, have been blocked from gaining a footprint in China thanks to government regulations and censorship, the Chinese cloud computing market presents a viable opportunity thanks to a relative lack of infrastructure. The Chinese government is investing heavily in building data centers to serve the country’s increasingly large number of smartphone users. According to a report by the China Software Industry Association, China’s cloud-computing value chain is expected to be worth $122 billion by 2015.