In Europe, Chinese Tech Giants Look to Take on Silicon Valley

Chinese internet tech giant Alibaba(BABA)is looking to give Amazon(AMZN),a run for its money in the European market,not only in ecommerce,but also in the surging cloud computing services market.


While Alibaba may be No.1 back in China,the company is looking to tap into Europe's advanced markets for growth in the future.Although Alibaba emulated Amazon's business model in acquiring dominance in the Chinese ecommerce market,the company is now looking to expand into Amazon's most profitable business,cloud computing services provided by its high-profit margin subsidiary AWS.


Revenue from Alibaba's cloud services business doubled during the year to approximately$2.1 billion.The company has opened its third cloud-computing centers in London in October,as it looks to establish a presence in Europe.Currently,Amazon is not in any danger of losing its dominant position as a world leader in cloud database warehousing,as Alibaba currently has only a minor presence outside of the Asian market.Alibaba's share of the world-wide cloud database services market increased to 4.6%in 2017,up from 3.7%from the prior year.According to research firm Gartner,this pales in comparison to Amazon's 51.8%share of the market.Alibaba's share of the European region last year was only 0.3%.


Although Alibaba is dominant in China,with a 47%share of the cloud-computing market,because it is the new kid on the block in Europe,it has had to offer discounts to try to entice customers from rival services such as Amazon and burgeoning cloud services provider,Microsoft(MSFT).


Because of growing resistance from the U.S.due to trade tensions and American concern over Beijing's influence over many Chinese internet tech companies.Chinese online retail giant J.D.com is looking towards Europe as a potential market for growth,as Europe has no tech companies that can match the dominance of the Silicon Valley giants and this provides a gateway for some of the Chinese tech companies to establish a presence in Europe.Many Europeans would welcome competition for the outsized and unchecked influence American online retail and social media exert on the continent.JD.com announced earlier in the year that it planned to invest nearly$1.13 billion in France to build up a delivery network for expansion of its supply chains.


One hurdle for Alibaba's attempt to establish cloud services in Europe is that it has no track record,whereas Amazon is a proven commodity.Many European firms see no compelling reason to shift cloud providers,unless they want to do business in China.This challenge is somewhat offset,however,due to the fact that many European companies favor using multiple cloud providers.Although this factor would not have much of an impact on Amazon,it could pose a problem for Microsoft in its quest to expand its rapidly growing cloud database services through its Azure division.


Despite the difficulties for entry into a market dominated by American cloud services giant Amazon,perhaps the biggest hurdle Chinese tech companies face for enticing European companies to embrace their cloud service offerings is the capricious and whimsical actions of their government towards some of its most successful domestic internet companies.


Earlier in the year,Tencent's explosive growth was abruptly halted when a Chinese regulatory agency refused to approve some of its new games it had hoped to place before an enormous worldwide market.Beijing deemed the games content objectionable,as it believed,in its infinite wisdom that it might be harmful to younger Chinese.


Bytedance Technology,owner of a popular news aggregator app was forced to apologize for its failure to realize that technology must be guided by core socialist values.


European companies viewing from afar this heavy and authoritarian hand of Beijing are loathe to trust their sensitive data to one of China's tech leaders over which Beijing exerts undue control.


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