Alibaba Cloud VS Amazon AWS: Step by step and become a good brother?

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Recently, the two cloud giants in China and the United States have released financial reports one after another. According to the data, Amazon Web Services (AWS) will have an annual revenue of US$62.2 billion (about 410 billion yuan) in 2021, a year-on-year increase of nearly 37.3%. In fiscal year 2022 (natural year from April 2021 to March 2022), Alibaba Cloud's cross-segment offset revenue exceeded 100 billion yuan, a year-on-year increase of 23%, achieving its first annual profit since its establishment 13 years ago. Many industry insiders believe that AWS will become the next stop for Alibaba Cloud. However, there are also opinions that Alibaba Cloud still has a long way to go compared to the luxuriant AWS.

Both originate from the endogenous demand of parent e-commerce cloud pricing comparison 2022

Whether it is the Amazon company behind AWS or the Alibaba Group behind Alibaba Cloud, they all share a common identity - the leader of e-commerce. The former is the world's largest online retailer and the world's largest e-commerce platform. The latter is an internationally renowned e-commerce company with the largest GMV (gross merchandise transaction) in the world cloud pricing comparison 2022.

Doing cloud was originally for "survival". E-commerce platforms are born with strong demand for cloud computing. For example, during the "Black Friday" abroad and the "Double Eleven" shopping festival in China, they are faced with large-scale traffic shocks. In the off-season, the number of user visits will be greatly reduced. There is a need for elastic scaling; the e-commerce platform carries many third-party sellers, and has high requirements for scalability and compatibility; the e-commerce platform also needs to display a large amount of commodity information, historical transaction information, etc., and must provide sufficient storage space, etc. . These endogenous demands drove the initial demand for the cloud cloud pricing comparison 2022.

"The development path is driven by endogenous demand, forming a closed loop of industrial technology innovation, incubating mature cloud technology, constantly testing, testing and iterating in business scenarios, and finally forming the two most advanced technical teams in the field of cloud computing." Beijing Computer Wang Juan, secretary-general of the Society's Digital Economy Committee, said, "Objectively speaking, apart from Amazon and Alibaba, no other company has the corresponding service capabilities, clear customer awareness, and urgent security and cost control needs cloud pricing comparison 2022.


Through internal incubation and long-term polishing, the cloud technology of Amazon and Alibaba Group has gradually matured and began to provide external services. Today, cloud has become the second growth curve of the two major e-commerce leaders, successfully achieving "feedback". The latest financial report data shows that in the first quarter of 2022, Amazon lost $3.8 billion, its first quarterly loss since 2015. The cloud business has become its "life-saving straw": AWS revenue increased by 37% to $18.4 billion, accounting for about 16% of Amazon's total revenue; net profit increased by nearly 57% year-on-year to $6.52 billion, making up for a large quarterly revenue Part of the deficit.


During the same period, Alibaba's quarterly revenue adjusted EBITA (adjusted earnings before interest, tax, depreciation and amortization) was 15.811 billion yuan, down 30% year-on-year. Alibaba Cloud's revenue increased by 12% to 18.971 billion yuan. Compared with 1.271 billion in fiscal year 2015, Alibaba Cloud's revenue in fiscal year 2022 has increased by 57 times in 8 years, accounting for nearly 12% of Alibaba's total revenue cloud pricing comparison 2022.

The e-commerce leader status is a "double-edged sword" for them. Lu Guotao, investment manager of Greiphyn Heights Asset Management LP, an American hedge fund company, said: "The main competitors of Amazon's e-commerce business, such as Walmart, naturally do not choose Amazon's cloud services, but tend to choose Microsoft. At the same time, because Amazon is involved in so many fields, there will be more areas for Amazon to compete with cloud computing customers, which may lead to slower growth of AWS, the most net cash flow generating business.”

"Cloud computing in business scenarios pays more attention to high-frequency transactions, distribution, interactivity and privacy protection in a high-concurrency environment, but government affairs and enterprises pay more attention to system security and reliability under multi-party collaboration. Being a cloud does have its natural drawbacks." Wang Juan said frankly.

Both broke through the critical point of profit

In the flywheel effect, only after breaking through the critical point, can the flywheel maintain a fast rotating state with a stable output of a small force, which is most vividly shown in the field of cloud computing. Cloud computing is a typical asset-heavy operation model. A large amount of infrastructure needs to be built in the early stage. For example, the construction of a data center requires not only the investment of fixed assets such as servers, power equipment, and temperature control equipment, but also a steady stream of water, electricity, site fees, and labor costs. In the future, we must maintain large-scale development and maintain innovation vitality through continuous investment in research and development. Therefore, there are very few cloud computing players in the world that can achieve profitability.

At present, from the public financial report data, only AWS, Microsoft Intelligent Cloud and Alibaba Cloud have crossed the threshold of profitability. From the perspective of the global cloud computing market share, based on the data provided by Gartner and IDC, these three cloud companies also happen to be in the top three, together accounting for nearly 70% of the global market share, and this trend will continue.


It is worth noting that although they are both in the first echelon, AWS and Alibaba Cloud still have a large gap in the global cloud market share. According to Gartner, AWS has a market share of 38.92%, while Alibaba Cloud has only 9.55%. However, in the Asia-Pacific region, Alibaba Cloud ranks first with a market share of 25.53%. In China, Alibaba Cloud occupies almost half of the country.

Zhang Yi, CEO and chief analyst of iiMedia Research, analyzed the reporter of China Electronics News: "On the one hand, most AWS users are scattered in the eastern and western hemispheres, and the time difference allows computing resources to be utilized to the greatest extent, which helps its profit margins. Improve; Alibaba Cloud is mainly based on domestic and Asia-Pacific market users, with relatively low resource utilization efficiency and limited profit margins. On the other hand, the overseas cloud market is relatively mature, and users are relatively willing to pay, and AWS is the main competition with it. Competitors such as Microsoft have differences in service content. However, the domestic cloud market is in its infancy, not only users have not yet developed the payment habit, but also the homogeneity of cloud services is serious, which limits Alibaba Cloud’s profit growth.”



Wang Juan pointed out: "In the early stage, Alibaba Cloud had a home field advantage in the domestic cloud market with its obvious price and technical advantages. Achieving annual profitability is an important turning point for Alibaba Cloud, which means that it has crossed the most difficult threshold. In the future, Alibaba Cloud will inevitably take the road of internationalization and face many uncertainties. If nothing else, Amazon will soon face a price war from Alibaba Cloud.”

First of all, go deep vertically and then break through horizontally.

As the global cloud computing "leader", the reason why Amazon can endure for a long time is closely related to its innovation ability. Regarding the underlying logic of the AWS technical architecture, Amazon CTO Werner Vogels explained: "Amazon Cloud Technology is the Lego of IT. We build a lot of very small building blocks. In the hands of developers, you can It can be combined at will." Such a business model allows enterprise users to abandon the process of repeating the wheel-building process, and instead spend more costs on more differentiated services and functions.

Every year AWS releases hundreds of innovative services. Up to now, AWS provides more than 200 categories of cloud services, and innovative achievements in the five fields of computing, storage, networking, security, and sustainable innovation emerge in an endless stream. The number of computing instances alone exceeds 400. The naming rules of Amazon EC2 instances are Most cloud manufacturers learn from it; the large-scale use of the self-developed ARM processor Graviton has completely changed the situation where only Intel x86 is available; AWS microservice applications provide developers with a more flexible, more convenient, and more secure deployment method. The IT world has had a profound impact; AWS also provides data scientists and engineers with extensive and in-depth AI and machine learning services and capabilities by building a machine learning stack... Such technological innovation capabilities and vitality are its Top reasons to be named a Cloud Computing Leader by Gartner for the 11th year in a row.

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Looking at Alibaba Cloud, it follows the technical route of "deepening the foundation", and the logic behind it is to build a complete basic system based on the characteristics of the cloud. With the Feitian operating system as the core, Alibaba Cloud has established a new computing architecture that integrates software and hardware such as self-developed chips, servers, computing, storage, and networks, which is unique in China.

In recent years, Alibaba Cloud's technological innovation has been remarkable. Especially in terms of chips, Alibaba's economy spans e-commerce, finance, logistics, cloud computing, big data, globalization and other scenarios, with a huge user base and a wealth of challenging computing scenarios, network scenarios, and machine learning scenarios. , requires the use of a large number of chips. Alibaba has continuously developed a variety of chips such as Yitian 710, Xuantie RISC-V series, and AI Hanguang 800. It is reported that Brother Pingtou has become one of the first-class chip companies in China due to the research and development of 5nm high-performance general-purpose CPU chips.

It is worth noting that AWS is the first cloud computing company to start deploying chips, and has now established three self-developed chip business lines. Gu Fan, general manager of Amazon Cloud Technology Greater China Product Department, explained the reasons why cloud computing companies vigorously develop chips: "Innovations that occur at the bottom are often the most disruptive. The innovation of self-developed chips will change cloud computing. The rules of the game are very important abilities.”

From the perspective of R&D investment, there is still a big gap between Amazon and Alibaba Cloud. According to public data, Amazon's R&D expenditure in 2021 will reach as high as 56 billion US dollars (about 370 billion yuan), and its revenue will account for about 12%. Alibaba's technology-related costs in 2021 will exceed 120 billion yuan, accounting for 14.07% of its revenue in fiscal 2022. Although its R&D investment is less than one-third of Amazon's, its revenue share has surpassed Amazon's.

According to Xu Hong, chief financial officer of Alibaba Group, Alibaba has set up seven research centers around the world, deployed more than 16 underlying technology fields, opened up more than 3,000 technology projects to the whole society, and has accumulated global invention patents in strategic emerging industries. Over 10,000 pieces. In the past three years, more than 60% of Alibaba's patent investment has been concentrated in hard-core technology fields such as cloud computing, artificial intelligence, and chips, and the annual growth rate of patent licensing in the cloud computing field has exceeded 50%.

From the perspective of technical routes, AWS and Alibaba Cloud both firstly "build deep foundations" vertically, and then "innovate breakthroughs" horizontally. However, AWS started earlier, has a higher technical breadth and maturity, and has a wider coverage from IaaS, PaaS to SaaS. Although Alibaba Cloud is slightly inferior, it is developing rapidly. It has established advantages in the IaaS layer, and is improving the layout of the PaaS and SaaS layers. The future can be expected.

The future will move towards ecological coupling

Ecology is one of the inherent characteristics of cloud computing. Cloud ecology is generally derived from internal business, and then integrated into vertical and related aspects. Both AWS and Alibaba Cloud’s ecosystems are like this. After the incubation of their own e-commerce business, they integrate vertical enterprises through the cloud platform. When there are enough companies in the service chain, the upstream and downstream enterprises in the industry are linked together to achieve ecological coupling.

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"All domestic cloud companies are targeting AWS, which need not be avoided." Wang Juan said, "Amazon is the first platform in the world to develop simultaneously in the fields of e-commerce, cross-border payment, logistics and industrial chain connectivity. Its language The environment, technical interface and business logic are based on European and American business culture, and have a strong international market vitality."

In order to revitalize the entire ecological network, more data centers must be established around the world to radiate computing power to a wider area. Dave Fildes, head of investor relations at Amazon, said: "We are investing in expanding AWS data centers around the world. In the fourth quarter (2021), we established the AWS Asia Pacific (Jakarta) region. 2023 or 2024 , we will also have the AWS Canada Calgary region. AWS now has 84 regions in 26 regions around the world. We hope to add another 24 regions in 8 regions over the next few years.”

"Doing a good job in the ecosystem" is also an important strategy of Alibaba Cloud. Recently, Alibaba Cloud announced to adjust the ecological strategy, reiterated the "integrated" strategy, and announced that it will set up a special team to support different types of partners, enrich industry solutions, and put forward clear quantitative requirements for the proportion of partners' income. Currently, Alibaba Cloud operates 84 availability zones in 27 regions around the world, and has the largest cloud infrastructure in Asia. In 2021 alone, Alibaba Cloud will add five new data centers, located in Indonesia, the Philippines, South Korea, Thailand and Germany.

"Alibaba Cloud has transformed the successful experience of local e-commerce internationalization into dual service capabilities of technology, business technology and business, and continues to internationalize in terms of market awareness, technical standards, logistics supply chain and financial system," Wang Juan commented, " However, Alibaba Cloud's domestic and international service systems will inevitably bring operating costs, arbitrage space, and compliance risks. Relatively speaking, Amazon has been developing under the European and American regulatory systems, and does not need to switch tracks. The security protection is very strict, and the focus on technology and compliance are more fully done, avoiding the cost of detours and looking back." China Electronics News, Electronic Information Industry Network.