BEIJING, February 29 (TMTPost)-- Alibaba offered its biggest ever price cuts for cloud products as the artificial intelligence (AI) development boom intensified competition in the cloud sector.

Credit：Visual China

Alibaba Cloud Intelligence Group (Alibaba Cloud) announced at an event on Thursday a decision of price cut across a wide range of its offerings starting from that day. The discounts, with average of 20%, covers more than 100 products, ranging from ECS (Elastic Compute Service), OSS (Object Storage Service) to RDS (Relational Database Services). Prices of OSS were slashed by as much as 55%, and prices of ECS and RDS lowered by up to 36% and 40%, respectively.  

Following the most severe price cuts in the company’s history, all the core products of Alibaba Cloud are cheaper than any other competitors available on the market, said Liu Weiguang, president of public cloud business at Alibaba Cloud. Li explained the discount campaign aims to promote application of cloud computing in China since the sector has developed for a decade, but the penetration rate of public cloud is still significantly lower than that of mature markets in Europe and the United States. As the biggest cloud service provider in China, Alibaba wants to lower the threshold of cloud services for more enterprises and developers to reap the technological dividends and accelerate the adoption of advanced public cloud services across various industries in China, said Liu.

Liu said the new campaign Alibaba Cloud initiated is not a short-term response to market competition, but a long-term strategic option, which is determined by the business model of public cloud. Alibaba’s latest price reduction is expected to usher in a new round of reshuffle in the cloud computing market. Canalys analyst Zhang Yi said Alibaba's rivals are likely to follow suit after the discount campaign. Reuters cited another analyst that Alibaba’s price cuts this tims seem more aggressive than usual, indicating the company’s focus on coutrting customers.  "The discount even applies to the undelivered orders for existing customers. This is seen as breaking the norm of the market," the analyst said.

Alibaba ’s move intensified cloud rivalry as domestic peers are rushing to leverage AI frenzy to grab the market share.  Alibaba Cloud remained its leadership in mainland China in the third quarter of 2023 with a 39% market share , and the company, along with two other top three vendors including Huawei Cloud and Tencent Cloud,  that quarter collectively grew 22% to account for a combined 73% share of customer spending, according to a market research note from Canalys in January. Canalys found that the Chinese cloud market may be reaching a phase of stable growth, but the top cloud vendors continue to invest heavily in AI technology, underscoring their collective commitment to embracing this growing trend.

Despite experiencing decelerated revenue growth, Alibaba Cloud remains committed to rolling out new AI products. It launched the “Bailian” platform in October 2023, a one-stop AI foundation model development platform. This platform streamlines intricate tasks for users, including model selection, fine-tuning, training and development, by providing access to diverse AI foundational models. In terms of capital investments, Alibaba Cloud announced the official availability of its first data center in the Central China region in September, located in Wuhan.

Financial results released earlier February showed Alibaba cloud posted revenue of RMB28.07 billion with a 3% year-over-year (YoY) increase for the fourth quarter of 2023. While revenue from Alibaba’s public cloud products and services experienced healthy growth, businesses excluding Alibaba-consolidated ones decreased YoY, primarily due to the decrease in revenue from low-margin project-based contracts as a result of continued effort to improve revenue quality. “The top priority for the group is to reignite the growth engines of our two core businesses: e-commerce and cloud computing,”  Alibaba Group CEO Eddie Wu commented in a financial report, adding that Alibaba will focus its resources on developing public cloud products.

At the earnings call, Wu was asked what should people expect in terms of the synergies of Taobao and Tmall Group and Cloud Intelligence Group since Wu now leads both of the major segments. Wu replied he sees very strong potential for greater synergy between these segments, especially driven by AI. The executive disclosed Alibaba is currently testing ways to leverage its in-house large language model (LLM) Tonyiqianwen to improve operation of Taobao and Tmall, and found there are very strong potential to leverage AI to significantly enhance search conversion and advertising monetization. While the test and development of related offerings are still at an early stage,  Alibaba sees excellent potential there, Wu said. He stressed AI will play a very active role in future search and ad offerings of Taobao and Tmall with further investments in the technology and in-depth research on it, though the research and development (R&D) of the offerings are at an early stage.