Thread by @lillianmli

1) AliCloud is finally profitable 12 years after its inception. Posting topline rev of $1.78bn and EBITDA of $3.7m in Q3 2020. In comparison, it took AWS 20 years to reach profitability.

However, interesting times ahead - some facts and thoughts on the state of cloud in China:

2) Don't get me wrong, Alicloud is doing well. Gartner rated them as being the global top 3 for IaaS in market share in 2020.

It just took them billions of investment to get there and unclear how much more billions in the future

3) Alicloud will invest an additional RMB 200 billion in the next three years. Tencent will invest RMB 500 billion in the next five years to build multiple million-level servers. Baidu will scale to 5 million units in 10 years, equivalent to an investment of RMB 300 billion

4) The investment isn't stopping anytime soon, but in the meantime, it's hard to raise project prices. Fierce price wars between the cloud providers keep this low. Tencent Cloud reportedly won the bid for the Xiamen government cloud project with one penny.

https://twitter.com/lillianmli/status/1350488800401584128

5) On top of the low prices, give the low rates of digitisation in China, buyers need additional customisation and offline support.
This basically means it's going to be low margins for a while for cloud.

lillianli.substack.com/p/why-are-ther…

6) On the bright side, the market is still huge for cloud in China. According to an official white paper, the cloudification rate of Chinese enterprises in 2018 was about 38%. Compared with 85% of the United States and 70% of the EU, there is still a huge gap.

7) The current digitalisation is happening mostly at manufacturers (industry still employs ~30% of the country). This is very interesting as it's laying down strong foundations for industrial cloud capabilities. China's could be leapfrogging into "industry 4.0"

8) Future of cloud in China will increasingly focus on Paas and SaaS. With IaaS covered, firms will want to start utilising their digitised data (and software vendors want higher margins).
Alicloud has started highlighting no-code / low-code as the next trend.

9) When I use my initial SaaS article, I thought it would take a long time to change manufacturer's workflows to be legible. But maybe China's SaaS future will be driven by low-code, with means the need for legibility will be lower (but maybe higher hand holding needs?)

Hopefully this thread does well so I have justification to write a longer piece on this <3

https://twitter.com/lillianmli/status/1369696806456745990?s=20