This article**: Times Weekly Author: Guo Meiting.
Alibaba Cloud once again announced a price cut, stirring up a pool of spring water in the public cloud market.
On February 29, Alibaba Cloud announced the largest price reduction in history, with an average reduction of 20% and a maximum of 55% on the official website of more than 100 products and more than 500 product specifications. New**Effective immediately. After the price reduction, Alibaba Cloud's core products** broke through the lowest price in the whole network.
A number of industry insiders reported to the Times reporter that Alibaba Cloud's price reduction is a good thing for enterprises with useful cloud needs. However, for some large customers of Alibaba Cloud, due to the high discount already given in the early stage, this discount is likely to be limited.
Will Alibaba Cloud's price cut trigger a large-scale follow-up in the industry?
On February 29, a reporter from the Times Weekly asked Tencent, JD.com and other major manufacturers about this issue, but as of press time, no relevant response has been received.
Economies of scale
In less than a year, Alibaba Cloud has already made two "big" price cuts.
In the middle of last year, Alibaba Cloud took the lead in announcing that it would make ** adjustments to some ECS products, with the highest reduction of 325%, subsequently, Tencent Cloud, JD Cloud and other cloud vendors backed by major Internet manufacturers announced price cuts, and operators were not to be outdone, and Mobile Cloud, e Cloud, etc. quickly followed. Earlier, Alibaba Cloud had also announced the decision to reduce prices many times.
Different from the past, this price reduction is not only the largest range of products in history, the widest range of beneficiary groups, but also the first time to give profits to customers for the unfulfilled part of the existing orders. It is reported that the price reduction of Alibaba Cloud this time far exceeds the price reduction action in the first half of last year. Almost all products have broken through the lowest prices on the whole network, and the range of products with reduced prices has directly covered millions of enterprises and developers.
Taking the cloud server U1 product, which is the most popular among small and medium-sized enterprises, as an example, it costs 768 yuan a year to buy a five-year version with 2C4G configuration, and only 485 yuan a year after the price reduction, a price reduction of 36%. OSS Standard Storage - Local Redundancy from 012 GB a month down to 009 GB, down 25%. In terms of databases, taking the ApsaraDB RDS for MySQL basic series as an example, it costs 936 yuan to purchase the five-year version of the 1C2G general-purpose configuration, and only 562 yuan a year after the price reduction, a price reduction of 40%. In addition, Alibaba Cloud has increased the monthly free Internet traffic quota for CDT from 10 GB to 20 GB.
Alibaba Cloud's price reduction is bound to be a good thing for enterprises with useful cloud needs. However, some of Alibaba Cloud's large customers have already given higher discounts in the early stage, so the driving effect of this discount may be limited.
For example, the ** discount of most of the cloud resources that Alibaba Cloud cooperates with us is 5-6% off the official website**, and now the official website ** is reduced by 20%, in fact, if it is discounted again, the theory will not be much less. The relevant person in charge of the cloud business of a state-owned enterprise revealed.
Liu Weiguang, senior vice president of Alibaba Cloud Intelligence Group and president of the public cloud business department, said that Alibaba Cloud's large-scale price reduction is to allow more enterprises to use advanced public cloud services and accelerate the popularization and development of cloud computing in all walks of life in China. In the future, the cloud must be the first choice for enterprises and developers, and technological innovation must be born on the cloud first.
Alibaba Cloud's price reduction is not a short-term market competitive behavior, but a long-term strategic choice, which is determined by the business model of the public cloud. Liu Weiguang mentioned that cloud computing is a business model with network effects and scale effects.
As the largest cloud service provider in Asia, Alibaba Cloud provides millions of customers with a reusable global cloud computing network and resource pool, and the more customers use, the more the cost of chain procurement, the average cost of R&D and the cost of resource idleness can be continuously reduced. Therefore, the more customers who use Alibaba Cloud, the larger the scale, the cheaper the cloud will be; With the continuous expansion of scale, the dividends of technology will continue to be released to give back to customers.
The beginning of the year is frequent
Cloud and e-commerce are the "two legs" of Alibaba's core, and the group's top management has repeatedly emphasized the importance of returning to these two businesses in public.
Recently, Alibaba Group Chairman Joe Tsai mentioned in his first public speech in 2024 that China's economy is in the process of digitalization and has a huge demand for cloud computing. "China accounts for about 17% of the world's GDP, and China's digital scale is equivalent to 30% of the world's, which is a very, very good market for developing cloud computing business. ”
Among them, the public cloud market holds huge opportunities. Liu Weiguang said that China's cloud computing has developed for more than a decade, but the penetration rate of public cloud is still significantly lower than that of mature markets in Europe and the United States. There are 20 million servers in the Chinese market and about 21 million servers in the United States, but the computing power provided in the form of public clouds in the United States accounts for 60%, while in China it is only 28%.
The increase in the penetration rate of the public cloud market is conducive to the improvement of computing power efficiency and the reduction of energy consumption in China as a whole. Data shows that the average resource utilization rate of a large number of self-built IDCs in China is less than 5%, while the resource utilization efficiency of data centers can reach 25%-40% for public cloud vendors such as AWS, Google, and Alibaba Cloud. The improved utilization rate of the data center can not only avoid the waste of hardware resources, but also reduce the energy consumption of computing power. According to statistics, if the utilization rate of data center computing power is increased from 5% to 25%, China can save 80 billion kilowatt-hours of electricity every year.
Alibaba Cloud's price reduction may hope to further expand its share of the public cloud market. According to IDC's "China Public Cloud Service Market (First Half of 2023) Tracker" report released in November 2023, Alibaba Cloud's market share among public cloud IaaS vendors is 299%, followed by Huawei, China Telecom, Tencent, etc. in China. However, compared with IDC's research data in 2017, Alibaba Cloud's market share at that time accounted for almost half of the Chinese market, which shows that the competition in the public cloud service market is becoming increasingly fierce.
In addition to the preferential measures on the product side, in the new year, Alibaba Cloud has also begun to reorganize and reposition its internal business. According to the news, at present, Alibaba Cloud has renamed the hybrid cloud business department as the government and enterprise business department, and after the adjustment, the core sales business level is divided into: public cloud business division, government and enterprise division, and overseas business division. Among them, the Government and Enterprise Division, formerly known as the Hybrid Cloud Business Division, is mainly for first-class customers, central state-owned enterprises and public utilities customers. The production, research, sales, and service teams of Proprietary Cloud have been merged into the Government and Enterprise Business Department to become a first-level department to improve the standardization and service capabilities of proprietary cloud product solutions and better integrate them with partners. The Government & Enterprise Division can sell all public cloud products at the same time.