Alibaba partnering to expand in Europe
Alibaba (BABA) is partnering to speed up its penetration of the European cloud computing market, which is forecast to grow at an average annual pace of 21% in each of the next five years. Earlier this month, the company reached an agreement with German semiconductor company Infineon Technologies to collaborate in cloud computing, focusing on the Internet of Things.
Last month, the company struck a deal with French transportation and communications company Bolloré to together develop cloud-based solutions that could be applied in a variety of industries. Also, Bloomberg reported last month that Alibaba was in discussions to enlist BT Group as a reseller of its cloud services in Europe. Alibaba struck a similar reseller partnership with Vodafone (VOD) in 2016.
Challenging Amazon in Europe
Amazon (AMZN) currently dominates the European cloud market, according to Synergy. With Amazon controlling more of the global cloud market than its four largest competitors combined, peers such as Alibaba are looking at dealmaking to catch up to the market leader.
The rise of multi-cloud strategies appears to be working in favor of Amazon’s top challengers, including Alphabet (GOOGL). We’ve seen Google win over several previously prominent Amazon cloud customers in recent months, such as Spotify (SPOT), which has signed up to spend ~$450 million on cloud services over the next three years.
Diversifying the business
Alibaba currently relies on its core commerce operations for most of its revenue. However, the commerce industry is quickly getting crowded, which could boost competition and costs, eating up profits. Therefore, Alibaba sees cloud computing as a way to diversify its business.