The past few years have not been easy for Alibaba Cloud. Since the first disclosure of revenue in 2015, Alibaba Cloud has maintained a growth rate of more than 100%, but it has begun to decline in the past two years, and there have been some unfriendly comments in the industry that "the decline is fully visible".
Objectively speaking, this is not the individual encounter of Alibaba Cloud, there are reasons for the general environment, and there are also bottlenecks that will inevitably arise from the development of the industry to a certain stage or a passive turning point caused by changes in the external environment, Alibaba Cloud has been "China's first cloud service provider" for more than ten years, and suddenly encountered changes, obviously a little too hasty in response, the most intuitive perception to the outside world is that Alibaba Cloud has fallen into a period of strategic adjustment, frequently adjusting the organization and replacing the boss, There has even been a back-and-forth on whether or not to spin off and go public.
However, judging from the recent situation, after a deployment since the end of last year, Alibaba Cloud should be out of the turbulent period, one is to clarify the strategy of "AI-driven, public cloud first", and the other is to optimize the organizational structure, and set up three core business departments of the public cloud business division, the government and enterprise division, and the overseas business division to work in different business areas.
Such an adjustment can be said to be immediate, according to Alibaba's latest quarterly report data, Alibaba Cloud's quarterly revenue is 2806.6 billion yuan, a year-on-year increase of 3%. Adjusted EBITA profit jumped 86% to 236.4 billion yuan, a new high in the fiscal year.
Judging from the data, the situation is stable, and the strategic intention is also good, but in fact, there are still hidden concerns, and the quarterly report also shows that the year-on-year growth in revenue is mainly driven by Alibaba's consolidated business, excluding the year-on-year decline in revenue from Alibaba's consolidated business. And this is also the new strategy "** The new strategy requires the initiative to reduce projects with low profit margins, cut off the "carrion", and the weight must also be affected to a certain extent.
Now the more critical question is:How to achieve the goal of "public cloud to scale first and expand market share"?
The answer is not complicated. At Alibaba Cloud's 2024 strategy conference on February 29, Alibaba Cloud told us the answer, and this answer is not unfamiliar - price reduction! Price reduction across the board! The biggest price reduction in history! ——More than 100 products and more than 500 product specifications are reduced by an average of 20%, and the highest is reduced by 55%, and the core products are the lowest price in the whole network.
Compared with several other dividend releases in history, this price reduction has three advantages: "two most, one first", and the product range has been involved in historymostLarge, beneficiary groupmostWide, tooFor the first timeThe unfulfilled portion of the customer's stock order is relinquished.
Alibaba Cloud is no stranger to price cuts, and Alibaba Cloud has launched a round of price cuts 10 months ago, which directly triggered a wave of price cuts in the industry as a whole. 10 months later, Alibaba Cloud once again offered a big move to reduce prices, so it should beHow to understand the intention behind this big kill?
Let me talk about my understanding from three levels:
First, activate the market and regain market share by reducing prices
Today, the domestic cloud market has fallen into a state of fierce competition, and each cloud vendor has made full use of its own resource endowment to expand the market, for example, Carrier Cloud and Huawei Cloud have used their special customer relationships to deepen the TOB market, while Tencent Cloud and Volcano Cloud have further deepened and expanded around their own ecosystems. So what is the biggest advantage of Alibaba Cloud? I think it's the cost advantage.
The cost of cloud services mainly depends on two factors: first, the scale of existing customers, the more customers, the lower the unit cost; The second is technical ability, the more advanced the technology, the lower the total cost.
Let's talk about the scale of customers first, as the largest cloud service provider in Asia, Alibaba Cloud has millions of existing customers, the more customers we use, the lower the comprehensive average cost of the first chain procurement cost, the average cost of R&D costs and resource idle costs, and the cheaper the cloud can be, which is also the main factor for Alibaba Cloud's frequent price cuts in recent years.
In terms of technical capabilities, Alibaba Cloud has continued to invest in the R&D of software and hardware integration for more than a decade, and has continuously improved R&D efficiency. The Feitian operating system and CIPU architecture can bring stronger performance with the same specifications and resources. The Pangu storage system greatly improves the resource utilization of storage through EC, compression and other technologies. The continuous optimization of self-developed chips such as Yitian 710 can improve the cost performance of databases, big data, AI, high-performance computing, and first-class codecs by more than 80%. It is such a strong technical strength that allows Alibaba Cloud to hold huge technical dividends, so that these dividends can be given back to users, and it is also the confidence of Alibaba Cloud to frequently reduce prices.
On the whole, Alibaba Cloud has a huge cost advantage, and making full use of this advantage to strengthen the market is a reasonable means of competition, and expanding the market space of cloud by reducing the cost of using the cloud, which is the first consideration of Alibaba Cloud.
Second, boost confidence by cutting prices and repair the image of "cloud computing".
In recent years, there has been a lot of "going to the cloud", and some enterprises have begun to move workloads that were originally deployed in the cloud back to their on-premise infrastructure. The cloud, which once attracted countless enterprises with its elasticity, flexibility and efficiency, why is it now suffering from the embarrassing situation of "going to the cloud"?
There are three main reasons for this: higher than expected costs, prominent security issues, and disappointed expectations. First, nearly one-third of enterprises found that the cost of migrating a project from on-premises to the cloud was much higher than expected, and the actual cost of running applications and storing data on the cloud often exceeded budget. Second, security has also become a focus of concern for businesses, especially when it comes to data privacy and cybersecurity. Third, many enterprises had high hopes for cloud computing to improve business agility and innovation, but the actual results did not meet expectations.
Alibaba Cloud price reduction,On the one handIt is a targeted alleviation of the anxiety of high IT costs for enterprises, especially in the current economic situation, the price reduction can effectively restore the confidence of enterprises in cloud computing to a certain extent, especially the price reduction of Alibaba Cloud is to cover both new and old users.
It is worth mentioning that in his speech, Liu Weiguang of Alibaba Cloud also deliberately elaborated on his understanding of the "cost of using the cloud", which should not only see the cost of capital investment in order to go to the cloud, but also the time cost saved by the cloud for the entire ICT process and business innovation. For example, Left-Hand Doctor quickly completed resource deployment based on Alibaba Cloud public cloud, shortening the project launch time by 67%.
On the other hand,Price reduction can attract some users who are in a wait-and-see state to establish their confidence in cloud computing through real cloud and cloud experience, especially the enterprise cloud can realize the modernization and upgrading of IT architecture, so that the original chimney architecture based on traditional IT has evolved into a distributed architecture with high availability, multi-location and multi-active, and hybrid deployment, so as to better support the business strategy innovation of enterprises. A good example is that Ctrip has upgraded its high-availability architecture based on Alibaba Cloud to achieve intra-city multi-active and unitized deployment.
From the perspective of the industry, Alibaba Cloud's price reduction will also help restore the trust of the outside world in cloud computing security, after all, the current security capabilities of Alibaba Cloud should be the strongest in China, especially the combination of software and hardware optimization on Alibaba Cloud, which will help customers' businesses achieve higher security resource utilization when virtual machines and containers are running.
Based on the above, I believe that Alibaba Cloud's price reduction will not only benefit its own market expansion, but to a certain extent, Alibaba Cloud's price reduction will help boost market confidence, repair the current image of "cloud computing is in decline", and promote the upward expansion of the cloud market space.
Third, use affordability to encourage government and enterprise customers to prioritize the use of public cloud
Alibaba Cloud's current strategy is clear – "public cloud first". However, "public cloud first" does not mean giving up the government and enterprise market, from the perspective of global technology development trends, public cloud is the future, and the government and enterprise market will eventually go in this direction.
One of the key questions facing Alibaba Cloud is: how to encourage government and enterprise customers to use the public cloud?
To put it simply, a more powerful incentive is to reduce the cost of using the cloud, that is, to reduce the price.
At present, most government and enterprise customers in the choice of public cloud, in addition to rigid policy restrictions, other thresholds such as technology, cost, service, security, etc., have been gradually eliminated in the efforts of Alibaba Cloud and other vendors, how to make them take the first step, need to have an attraction, and price reduction can play a good role in attractiveness, so that government and enterprise customers start to try the public cloud, starting from non-core systems and data, through time and experience, taste the "sweetness" of public cloud, and slowly cut into the core system and data, I thinkThis is the plan of Alibaba Cloud.
Conclusion
Alibaba Cloud's price reduction is definitely a big deal for the industry, and there are many discussions in the industry, some people feel the opportunity, and some people feel the pressure, which is normal. It should be pointed out that this is the only way for Alibaba Cloud to practice the "public cloud first" strategy, and price reduction is not a short-term market competition behavior, but a long-term strategic choice, which is determined by the business model of public cloud.
For Alibaba Cloud, through this large-scale price reduction, more enterprises can use advanced public cloud services and accelerate the popularization and development of cloud computing in all walks of life in China, which is in line with Alibaba Cloud's original intention of "making cloud a public service and creating social value", which is Alibaba Cloud's plan.
For the industry, this may be an opportunity, an opportunity to reshape the market's confidence in cloud computing, break through the bottleneck and expand the space, superimposed on the current AI model explosion to drive the opportunity for cloud computing to re-grow, the future of the domestic cloud computing market will definitely be more lively, the boss Alibaba Cloud has shown its posture, it depends on how other players respond.