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<Editor's Pick>Alibaba Cloud and Tencent Cloud’s battle for the lead
This year, the pace of Tencent Cloud's business expansion and deployment has accelerated significantly due to the impact of the Covid-19 epidemic, the "New Infrastructure" initiative, and the "Digital Empowerment" initiative. First, in early July, a data center that can accommodate millions of units in Qingyuan was officially opened for service, then, Tencent Politics announced a new strategic upgrade.
In addition, Alibaba Cloud and Tencent Cloud’s battle for the lead has become more intense.
Also in early July, Reuters reported that Tencent Cloud was becoming more aggressive in its strategy to compete with Alibaba Cloud. For example, during the prevention and control period of the epidemic in February this year, in order to address the surge in demand for enterprise e-meetings at Tencent meetings, Tencent Cloud added 100,000 servers in eight days. Tencent Cloud is hiring more than 3,000 employees this year. Tencent will invest RMB 500 billion in new infrastructure over the next five years, while Alibaba Cloud will invest RMB 200 billion over the next three years.
According to Reuters, a Tencent Cloud salesman said "the competition between Tencent Cloud and Alibaba Cloud is fierce and the sales team is fighting for every order. An Alibaba Cloud employee in charge of the industrial sector, Zhang Liang, also confirmed to Geek Park that "the competition with Tencent Cloud was really fierce in the first half of the year.
The gradual convergence of strategic products
In fact, Alibaba Cloud and Tencent Cloud, as the "double oligarchies" of domestic cloud computing, have occupied the first and second positions respectively for many years. It's more like a "zero-sum game" as the two shares grow and fall.
On the one hand, demand for cloud services has skyrocketed in China and around the world. On the other hand, the revenue and value of the cloud computing business are contributing more and more to Alibaba and Tencent as a whole. In the 2019 fiscal year, Tencent Cloud grew 86.8% year-over-year, and in the 2020 fiscal year, Alibaba Cloud grew 62% year-over-year. Both are growing, but Tencent Cloud is growing a bit faster. Cloud computing will become one of the most important "battlegrounds" for Alibaba and Tencent in the future.
Tencent Cloud can compete directly with Alibaba Cloud, and the gap between the two is expected to narrow further in the future," said CLSA analyst Xiangyi Liang.
Putting aside the disparity in their shares, Tencent Cloud and Alibaba Cloud actually have their own advantages. For example, Alibaba Cloud is deeply integrated with Alipay and other digital services and accounts for nearly half of the financial cloud solutions in China. Tencent Cloud's advantage lies in the field of streaming video and games, with nearly 75 percent of game makers choosing Tencent's cloud services.
The two are also distinctive in their positioning. Alibaba Cloud adheres to empowering small and medium-sized enterprises and the driving industry.
Tencent Cloud, on the other hand, emphasizes being a "connector" of the industry. Through a C2B model, Tencent Cloud uses the experience of the C side to serve users in the B side and then strengthens the experience of the C side through the technical services of the B side.
Although the two statements are different, the logic behind them is similar.
Tencent's Liu Chuping once said, "The cloud computing industry is developing rapidly, and we are still at the basic service stage. In the future, Tencent will enter the PaaS and SaaS layers with higher gross margins. At the same time, cloud services are benefiting our other businesses, such as finance, payments, and advertising."
Compared to the maturity of the U.S. SaaS market, the domestic IaaS market is the fastest growing and accounts for the largest share, while the PaaS and SaaS market potential has yet to be tapped. In March 2019, Alibaba Cloud launched its "SaaS Accelerator Program," not doing SaaS itself and insisting on being integrated. At the end of the year, Tencent Cloud launched its "Thousand Sail Program", which includes SaaS Accelerator, SaaS Technology Alliance, and SaaS Select. The underlying logic of both is to drive PaaS and IaaS through SaaS ecology, which essentially solves the ecological problems of the cloud computing industry and builds a bridge between enterprises and the cloud.
So, their strategies are similar, i.e., they are competing against each other in terms of their own cloud ecosystems, as well as their ability to build external cloud ecosystems. Meanwhile, after this year's epidemic, the two are targeting the same areas, corporate services, government, and education. Since there is convergence from strategy to platform product, what is the difference between first and second place?
How far is the first from the second?
Geek Park interviewed a number of sales and third-party agents and came to the same conclusion, "There is not much difference between Tencent Cloud and Alibaba Cloud, the difference may be in the pricing strategy, Tencent Cloud pricing is often cheaper."
Earlier this year, Develop Paper compared key metrics for the Alibaba Cloud and Tencent Cloud IaaS layers, cloud servers, cloud databases, and object storage for three basic products. It was found that Tencent Cloud is cheaper than Alibaba Cloud for the three basic products at the IaaS layer, and that Tencent Cloud's performance metrics are as good as Alibaba Cloud's and even better than Alibaba Cloud's for certain parameters.
So, is Alibaba Cloud really relying solely on its "first-mover advantage" and economies of scale to capture most of the domestic market share?
Tencent Cloud is four years behind Alibaba Cloud. “Alibaba Cloud is more mature, and Tencent Cloud is slower in many of its strategies compared to Alibaba Cloud”, he said. For example, Alibaba Cloud has been pulling cloud services through its SaaS strategy for a long time,” Tencent Cloud sales Linda said.
Zhang Liang, an Alibaba Cloud employee, argues that Alibaba Cloud didn't just start early. He told Geek Park that, although Alibaba's DNA is to empower small and medium-sized enterprises, Aliyun has an outstanding advantage in serving large enterprises in the industrial sector, and is an industry experience that has been accumulated after a long period of trial and error. For example, providing smart services and smart manufacturing to address issues such as order inventory, energy consumption, and product consistency.
The industrial sector to serve large enterprises is precisely Tencent Cloud's shortboard. "Tencent Cloud is a project that trades investments for large enterprises. In particular, during the epidemic, many small and medium-sized industrial and manufacturing enterprises are tightening their belts to survive, in this case, industrial manufacturing small and medium-sized enterprises will be more difficult. Overall, in the industrial sector, Tencent Cloud is following the same path as Alibaba Cloud did two years ago.”
In July 2019, Nikkei News reported that Shanghai Anshun Network Technology Co. had switched to Tencent Cloud as it received a 100 million RMB investment from Tencent. The source said Tencent has recruited many business partners similar to Anshun, which is why Tencent's cloud market share is rapidly expanding.
Tencent Cloud sales Linda also quite agree, she said to Geek Park, Tencent Cloud grew quickly, mainly thanks to Tencent investment department, for example, Ping Duoduo has been using Tencent Cloud, and last year, they began to add servers, with cloud volume growing quickly.
IDC analyst Liu Lihui has said that Alibaba Cloud and Tencent Cloud started from the same starting point, except for customers from manufacturing.
In fact, in recent years, the cloud services market has become highly homogeneous, both in terms of product form and technical concept, basically the same. In the end, it's the quality of service that counts.
“Tencent's investments in the Internet and gaming industries are very good, but there are many sales and service processes and internal controls that need to be optimized. For example, sales and product team information is not in sync,” Linda said.
However, Tencent Cloud still has many opportunities. Alibaba Cloud employee Zhang Liang pointed out that in the field of education and other C-side, Tencent reached more users due to WeChat and QQ social tools, and established a stronger connection with users than Alibaba. Tencent has also invested in a number of educational institutions, such as VIPkid and Yuantiku. So, Tencent Cloud's strength or advantage lies in industries such as education.
In addition, Chinese cloud giants have entered a period of rapid growth with investments in overseas markets such as Southeast Asia. Synergy Research Group data shows that domestic cloud vendors are more aggressive than AWS, Google, and others, with overseas deployment becoming the new target.
The race between Alibaba Cloud and Tencent Cloud is still in the middle, and Tencent Cloud needs more performance to prove itself.
This is an article from WeChat official accounts GeekPark (ID: geekpark), written by Qian qian, translated by Linda Yang.