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China's cloud computing War: the zero sum game of big manufacturers?

Time:2021-12-15 16:54:15

From "old wine in new bottles" to "ballast stone of market value", more than ten years are fleeting, and cloud computing has come to a crossroads again.

On April 21 this year, Gartner released the global cloud computing market data for 2020. The IAAs market maintained rapid growth, and the global market reached US $64.39 billion. Among them, the report shows that the growth rate of China's market is more than 60%, which is one of the largest and fastest-growing markets in the world.

Among the cloud manufacturers, the market is further concentrated on the top manufacturers. Amazon, Microsoft and Alibaba cloud rank among the top three in the world, gradually forming a long-term and stable 3A pattern.

Objectively speaking, if we find a footnote for the rapid development of the domestic cloud computing market, Amazon plays an important role.

No matter in 2006, Amazon AWS publicly released S3 storage service, SQS message queue and EC2 virtual machine service, which became the beginning of cloud computing industry; Or in December 2013, Amazon announced that AWS had entered the Chinese market, stirring the "spring water" of cloud computing.

The latter plays an extremely important role. With the official landing of Amazon AWS in China and the development of cloud services in the way of "front store and back factory", many companies, including IBM, have successively issued price reduction and joint announcements. Under the pressure of the army, the competition in the domestic cloud computing market has opened.

At that time, Amazon AWS did not say it was winning the domestic cloud computing market, but it was also somewhat complacent.

In 2014, Rong Yongkang, then vice president of AWS and executive director of China, was interviewed. When the reporter asked how to view the price reduction actions of cloud manufacturers such as IBM and Alibaba cloud, Rong Yongkang responded with "very large market scale and prospect" and "cultivating this market on the same front".

The reporter then mentioned, "can it be understood that China's public cloud market is still in a stage of joint development and cultivation, and has not reached the status of zero sum game?"

Rong Yongkang affirmed this, "it is difficult to say when this market will fully develop and mature, and companies are really in a zero sum game. This depends on the acceptance and application speed of enterprise users to cloud computing."

Now, under many factors, Amazon AWS has lost power in the domestic cloud computing market, but seven years later, the domestic cloud computing industry has also ushered in many changes. With the increasingly fierce competition among cloud manufacturers, has the cloud computing market turned into a zero sum game?

01 clouds come and go

"In fact, Yun knows that he can't escape Taobao's prison."

On the evening of September 9, 2020, at a live broadcast, Ma Yun and Faye Wong sang an adapted version of "if cloud knows". The "cloud" in the lyrics, Faye Wong said it was Ma Yun's "cloud", so she specially changed the lyrics.

But from another point of view, the cloud in the lyrics is also the cloud of cloud computing. At that time, in 2010, Taobao abandoned Oracle architecture and adopted Alibaba cloud computing platform as the underlying infrastructure. It can be said that Alibaba cloud's development is really inseparable from Taobao.

Different from the large-scale landing scenario found by Alibaba cloud, in the same period, Tencent opened the platform to access the first batch of applications in February 2010, and Tencent cloud officially provided cloud services to the outside world; In 2011, Tencent's open portal was officially launched, and the prototype of Tencent cloud - Open cloud was born.

In February of the following year, Jinshan software announced the transformation of mobile Internet in Beijing and established a subsidiary of "Jinshan cloud" to enter the field of cloud computing.

Zhang Hongjiang, then CEO of Jinshan software, said that at present, foreign technology giants such as apple, Microsoft and Google have invested in cloud storage, and Baidu will soon launch similar services. "I am optimistic about the prospect of personal storage market under the rapid development of mobile Internet."

With the cloud computing market gaining more and more attention, China's cloud market officially entered its infancy in 2013.

In June 2013, baidu announced that it would officially name the services provided to developers as "Baidu Open Cloud". In September of the same year, Tencent cloud announced that its cloud service platform was officially open to Internet application developers and officially became a public cloud service manufacturer.

At the same time, while domestic Internet companies represented by bat, as well as telecom operators, server suppliers and start-ups have invested in the cloud computing industry, Amazon suddenly entered the domestic market on December 18, 2013.

As an indisputable international industry giant, on the day Amazon AWS landed in China, IBM first announced the cooperation agreement with century Internet at a press conference. Then, Alibaba cloud took the initiative to reduce the price by 50%, Tencent cloud launched a 60% discount promotion, and then there were cloud manufacturers such as Jinshan.

In order to seize the market, price war has become the norm in the domestic cloud market. According to statistics, Amazon AWS reduced prices 42 times in the market pioneering period before 2014.

According to such a development trend, as the predecessor of the cloud market, Amazon AWS's first mover advantage is enough to kill most players in the domestic cloud computing market.

However, since 2015, there have been a number of requirements for the implementation of "foreign capital cloud" in China. Because cloud computing services are closely related to data centers, and data center services are not fully open to foreign investment in China, Amazon AWS is difficult to spread in a large area.

Until November 2017, halo.com announced the purchase of specific operational assets related to cloud services based on Amazon cloud technology, so as to continuously and stably provide and operate cloud services based on Amazon cloud technology in China.

However, after missing the industry development period, the domestic cloud computing market has long been another scene.

According to the data of the global cloud infrastructure service market in the fourth quarter of 2018 released by the US Market Research Institute synergy research group:

In the Chinese market, Alibaba cloud still ranks first with a market share of 40.5%, followed by Tencent cloud with a market share of 16.5%, and the other three of the top 5 are covered by halo new network (AWS), China Telecom and China Unicom.

During this period, on September 30, 2018, Tencent readjusted its organizational structure, added a cloud and intelligent industry business group (CSIG), and officially launched the battle of Tob; on November 26 of the same year, Alibaba announced the adjustment of its organizational system and upgraded Alibaba cloud business group to Alibaba cloud intelligent business group.

From these two adjustments, cloud computing has long become the strategic focus of major domestic Internet manufacturers.

Since then, as the strategic position of cloud computing has gradually increased, Alibaba, Huawei, Tencent, Baidu and other major manufacturers have also made business adjustments in cloud business, which will not be repeated here.

02 face to face competition

In December 9, 2021, Canalys, the market research organization, released the Chinese mainland's cloud infrastructure services expenditure report in the third quarter of 2021. Data show that Ali cloud continues to maintain the leading position in the Chinese mainland, and HUAWEI cloud, Tencent cloud and Baidu cloud compete for second, third, fourth place.

Today, the cloud computing industry is not just Matthew effect, but evolved to the 28 rule. According to canalys data, the four local cloud service providers continue to dominate the domestic market, accounting for 80% of the total expenditure.

With the gradual concentration of cloud computing market share, the competition faced by cloud manufacturers is becoming more and more fierce. Mainstream cloud manufacturers should not only guard against large public cloud giants, but also face similar small and medium-sized cloud manufacturers. Their market environment is not optimistic.

According to the "photon planet", with Chengdu as the center, Alibaba cloud focuses on the southwest region with a high proportion of Huawei cloud market, and Huawei cloud also makes greater efforts to attack Alibaba's base in Hangzhou. When the competition enters the white hot stage, the two giants begin to increase their firepower and attack each other's hinterland.

On the other hand, more and more Internet companies choose to build their own clouds, such as JD cloud and byte cloud. With the transfer of the original large customers in the market, it intensifies the industry competition.

On December 2 this year, byte beat's volcanic engine officially released a full range of cloud products, including cloud foundation of IAAs layer, video and content distribution of PAAS layer and other modules. After the IAAs layer products are supplemented, byte beating will compete with Alibaba cloud and Tencent cloud.

Interestingly, at the press conference, byte regarded itself as a "new cloud", but to some extent, byte beat chose an "old way".

From the perspective of byte commercialization realization, this action belongs to the realization of technical resources.

On the overall path, it reproduces the mainstream commercialization evolution steps of Internet giants, that is, after gathering large-scale traffic, first realize the traffic, and then further tap the technology spillover value. Volcanic engine is a technology realization platform similar to AWS and Alibaba cloud.

On the other hand, in the business field, IAAs layer functions mainly include computing, storage, network, etc. the high homogeneity of upstream hardware resources objectively determines the high homogeneity of IAAs products.

At this stage, almost all the services provided by volcanic engine can be found in Alibaba cloud, Tencent cloud and Huawei cloud; The targeted industries such as finance, games, consumption and media are also the focus of competitors' layout.

As for the "multi cloud" strategy it relies on, rightscale's survey of global enterprise cloud strategy in 2019 shows that among large enterprises with more than 1000 people, 84% choose multi cloud deployment, including 58% hybrid cloud.

This "cloudy" strategy, or a turnaround to expand market share, also aggravates the face-to-face competition of cloud manufacturers.

With the change of market competition situation, it is also transmitted to the organizational structure and strategic deployment adjustment level of mainstream cloud manufacturers.

In 2021, Huawei's cloud organizational structure and personnel adjustment occurred frequently. In January, Yu Chengdong first served as president of Huawei cloud and computing BG, then revoked cloud and computing BG, and then Huawei cloud returned to bu mode. Behind the violent shock of Huawei cloud organization and personnel structure, it reflects the "indecision" of Huawei cloud.

During the same period, in April 2021, Alibaba cloud announced to adjust its organizational structure. Zhang Jianfeng, President of Alibaba cloud intelligence, said in an internal letter that it would subdivide manufacturing, finance, retail, education and medical care into 18 industries, followed by the establishment of 16 regions to be responsible for regional localization operations.

At that time, a relevant person interpreted that "Alibaba cloud serves government and enterprise customers through 18 industries and 16 regions." Government and enterprise customers are the home of Huawei cloud.

Tencent cloud is indispensable for the strategic adjustment of mainstream cloud manufacturers. On May 14 this year, Tencent cloud and smart industry group (CSIG) announced a new round of architecture upgrading, which is another major adjustment of Tencent to B business after the "930 change" in 2018.

Behind the strategic adjustment of various cloud manufacturers, Chinese enterprises on the cloud are stepping into the deep water.

03 zero sum game?

The so-called zero sum game means that the sum of the interests of all players is zero or a constant, that is, one party has income and the other party must lose.

There are two dimensions here. One is that the sum of the interests of the game players is stable; The second is "gains must be lost". In this dimension, the zero sum game is extended to "the law of conservation of happiness", which means that "if someone is happy, someone must be lost", that is, "happiness must be based on the pain of others".

In the field of cloud computing, it can also be analyzed from these two dimensions.

First, in the first dimension, according to the global cloud computing market data released by Gartner in 2020, the growth rate of China's market is more than 60%, which is one of the largest and fastest growing markets in the world, which seems to be contrary to the "zero sum" trend.

However, from the perspective of going to sea, in the past few years, due to factors such as China US trade war, Chinese cloud manufacturers such as Alibaba cloud and huaweiyun have already suspended their expansion in the United States.

Although domestic cloud manufacturers have been trying to expand overseas business, domestic cloud computing manufacturers are facing many obstacles in international expansion under the away battle.

According to the magic quadrant of 2020 cloud infrastructure and platform services released by Gartner, since this quadrant only counts overseas markets, Alibaba cloud is only in the quadrant of "niche market"; In the magic quadrant of cloud infrastructure and platform in 2021, Alibaba cloud has entered the "visionary" quadrant.

In the definition of Gartner Magic Quadrant, niche enterprises refer to companies with low scores in terms of completeness and execution ability of the company's development prospects. They may occupy a certain market share, but they are still inferior to larger manufacturers. "Visionaries" are prominent in foresight.

In the two reports, the profile shows that it is difficult for domestic cloud computing manufacturers to expand market share overseas.

In general, considering many factors, the "civil war" of cloud computing competition is becoming more and more obvious. From this perspective, the domestic cloud computing market has indeed tended to "zero sum" in recent years.

In addition, it can also be analyzed from the dimension of "gain must lose".

Taking the IAAs layer in the cloud market as an example, the homogenization of products and services means that the platform faces price competition, which is also the famous "Bezos law" in the cloud computing industry. In the process of cloud development, the price per unit of computing power will be reduced by 50% every three years.

Take Amazon AWS for example. As of May 2020, Amazon AWS had reduced prices 82 times.

Moreover, "0 yuan bidding" is also common in the industry. Previously, in 2017, Tencent won the Xiamen government extranet cloud service for 1 cent, and Shanghai Telecom won the Shanghai government cloud service for 0 yuan. Recently, five leading cloud enterprises, including Huawei cloud, Alibaba cloud and China Unicom, staged another "0 yuan bid".

Similarly, take the fledgling "byte cloud". In the official context, "extreme cost performance" has become the selling point of "byte cloud", but "cost performance" and "price war" are "different in the same way".

Faced with the price pressure and resource advantages of mainstream cloud manufacturers, medium and small cloud manufacturers such as Jinshan cloud and youkede are extremely difficult, increasing income without increasing profit and expanding the degree of loss, which has become a realistic portrayal of many medium and small cloud manufacturers.

As the winning party in the market competition, the life of mainstream cloud manufacturers is also difficult.

Now, Alibaba cloud and Tencent cloud are falling into a growth bottleneck. Take Alibaba cloud as an example. Since 2018, Alibaba cloud's revenue growth has tended to slow down. In the first two quarters of 2021, Alibaba cloud's revenue has stagnated.

This also proves that there is a "gain must lose" in the cloud market.

Of course, looking back, scientific and technological innovation has been unstoppable since ancient times. At present, "going to the cloud" is still the general trend, but the "zero sum game" in the market at this stage may become an unavoidable "side effect" for cloud manufacturers.

reference material:

Rong Yongkang: cloud computing is not a zero sum game

A decade of cloud computing: big country game and life and death battle of Internet giants

Later, finance and economics "the new cloud with beating bytes has no new story"

Commercialization view "Research Report on commercialization in 2021"

Caixin "China Cloud total war"