Alibaba Is Scouting Locations for a Second European Data Center

Misha Savic (Bloomberg) -- Alibaba Group Holding Ltd. is considering locations for its second data center in Europe, as China’s largest e-commerce operator expands its global footprint to better compete with Amazon.com Inc. in cloud services.

“Right now, Europe is really a weak region for us, very weak,” said Lin Luo, Alibaba’s deputy director for international government and public affairs, citing London and Sweden as potential locations for a new data center. “We have to figure out what is the best strategy for here.”

Alibaba’s cloud computing division is one of its fastest-growing businesses, doubling revenue in its latest quarter alone. China’s largest e-commerce operator is investing billions of dollars on talent and data centers around the globe to compete with the likes of Amazon.com Inc. and Alphabet Inc.’s Google. 

While the unit remains a sliver of the overall business, the division could yield 15 percent of revenue by 2021, according to JPMorgan Chase & Co. analysts Alex Yao and Gokul Hariharan. It recently surpassed a million customers, worldwide.

The internet giant wants to add additional capacity to the region on top of a data center in Frankfurt it opened in November, Luo said in Belgrade, Serbia, where she met with government and business officials to discuss IT cooperation. Having a single data center to cover the continent was a problem, she said.

Related:Alibaba's Increasing Cloud Data Center Footprint

Alibaba Cloud has mushroomed since its launch in 2009, and now operates 14 data centers from the U.S. to China. It intends to set up new centers in Indonesia and Malaysia this fiscal year.

Like Amazon’s, Alibaba’s cloud service emerged from the enormous computational power needed to handle millions of online shopping transactions. It’s placed cloud at the heart of its global expansion, beefing up its presence from the Middle East to the U.S. AliCloud hosts more than a third of the websites in China, the world’s biggest internet arena. A service akin to Amazon’s AWS that provides computing power over the internet, it also underpins other pieces of the Alibaba empire, such as video streaming, payments and e-commerce.

Its cloud infrastructure service was the third largest by revenue in 2016, and outstripped global rivals from Microsoft to Amazon with 126.5 percent growth, Gartner said in a report Wednesday. It commanded however just 3 percent of the global market versus Amazon’s 44.2 percent, though that was up from 1.8 percent in 2015 and exceeded Google’s 2.3 percent, according to Gartner.