By Léon Rodenburg, Alibaba Cloud MVP
Xebia’s partnership with Alibaba Cloud offers a business gateway to China’s billion-plus market, with speedy transactions and physical and digital infrastructure that frees companies to focus on their core activities.
With over 1.4 billion digital customers, China presents an invaluable market opportunity for international expansion. However, several Western companies have seen their experiments in China fail often due to cultural and regulatory factors. Besides social differences and entirely dissimilar internet platforms in China and the West, stringent rules and regulations tend to rather sternly govern business transactions in the country, especially when it comes to e-commerce.
For many companies, the major hurdle concerns software operations in a landscape vastly different from other markets, especially of those in the West. For instance, Google has no access to the Chinese cloud market, while Amazon and Microsoft only have a relatively small market share amounting to a few percentage points. Both companies outsource their data centers to Chinese providers with whom clients cannot communicate even in the case that something goes entirely awry. Because of these issues, foreign companies looking to reach Chinese consumers while also retaining control of their data need to rethink their enterprise architecture.
Fortunately, there are several options, both locally in China and overseas. Alibaba Group, China’s largest cloud player, has been operating a cloud services division since 2012 and now has operations spreading across 19 regions worldwide. Tencent, the creator of the social mega platform WeChat, has also rooted itself a cloud computing world for some time now. Others, such as Baidu and Huawei, still focus mainly on the Chinese market. Overall, these companies are competitive players, offering cloud services very much comparable to the services from their American equivalents of Google, Amazon, and Microsoft. Then, paired with the low network latency from and to mainland China, the opportunities for expansion into China become apparent.
Xebia is well positioned to help customers break open the Chinese market. Thanks to a close partnership with Alibaba Cloud, Xebia can facilitate quick internet transactions and rigorous data protections while exporting the results of those operations to Europe or the US.
Why Alibaba? What does Alibaba have to bring to the table?
With a 48% market share, Alibaba Cloud can easily provide cloud infrastructure for many large companies from both China and overseas. Alibaba Group hosts all its own products with Alibaba Cloud, including market leaders such as the global ecommerce marketplaces of AliExpress and Tmall, mobile and online payment platform Alipay and ride-sharing service Didi, and Alibaba Cloud’s servers are attested to be able to handle very high volumes of daily data traffic with these market-leading services from Alibaba Group. For a dollar value, consider the Double 11 Global shopping festival, held on November 11 annually. With nearly 5,00,000 transactions per second, or $30.8 billion dollars’ worth of goods on just one day last year, the several companies at Alibaba Group accounted for nearly half of all transactions last year — more than the US sales figures of Thanksgiving, Black Friday and Cyber Monday combined.
Founded as a business-to-business marketplace in a tiny apartment in Hangzhou in 1999 by Jack Ma and 17 others, the original brand of Alibaba.com quickly scaled into Alibaba Group, the global entity we all know today. But it was Alibaba Group’s 2003 entry into the consumer-to-consumer marketplace with Taobao that laid the foundation for Alibaba Cloud. The traffic generated by a platform where anyone could open their own store required enormous data centers, and once the setup was in place, Alibaba was able to extend those services to other companies — as Amazon does.
Within the Alibaba ecosystem, several group companies can help you get a foot on the ground. Cainiao delivers goods even to remote areas, while Alipay supports convenient mobile and online payments on a trusted platform. The advertisement network Alimama helps to bring your brand and promotional videos the online video platform of Youku, the Chinese equivalent of YouTube. Once visibility is established, products can be retailed in a Tmall shopfront, and customers can then be redirected to a physical store via Amap. In short, Alibaba’s focus on servicing small and medium-size businesses advances an array of services aligned to every functional area.
So How Can I Use Alibaba Cloud to Expand into China?
That answer lies in the technical problem that it can help to solve. If Chinese citizens access websites outside the country, their traffic passes what’s often referred to as The Great Firewall of China. This combination of legislative and technical measures including DNS filtering, deep packet inspection, and IP address blacklisting allows the government to effectively take down foreign websites whose content does not adhere to local regulations. Companies that play by the well-documented rules can continue to operate websites in China — though not all do. Google chose not to, which cost them the Chinese market, but Microsoft’s Bing conforms with regulations. Yet, though China’s online environment has sparked questions of privacy and data security, fears about government spying remain unfounded. With the right measures around encryption and data governance, working with Chinese cloud products certainly doesn’t equal giving away your data.
The issue is one of speed. The Great Firewall’s technical constraints considerably slow down websites hosted abroad, especially in the US or Europe. In the e-commerce space, this added latency can be disastrous for business. Even a few seconds’ extra load time can drastically reduce conversions and sales figures. Consequently, business volumes may remain low and companies may find themselves in the red even years later, leading to business reevaluations or worse, market exit.
Using a Chinese cloud provider makes the difference between success and total market failure. With dedicated fiber networks from mainland China to the rest of the world, they ensure the low-latency delivery of internet traffic unaffected by the firewall. As your first experiment in cloud, you can use Alibaba Cloud’s Content Delivery Network (CDN) to cache product detail pages and images in China. These are created locally and hosted in an overseas Alibaba Cloud region such as Frankfurt. When a Chinese consumer accesses the page, its content is fetched from Frankfurt over Alibaba Cloud’s unfiltered backbone, a much faster process than having the user access your website over the public internet. The content is then cached in China for subsequent page views.
Sub-second page loads ensure that no sales are lost due to technical slowness — leading to higher conversion rates and greater sales, freeing businesses to focus on core activities such as product market optimization. Worth noting here is that a different system governs online content cached or hosted within China. While not subject to the firewall, a special permit called an ICP license is required to publish online under a domain name. Obtaining such licenses can be difficult, but experienced companies can help to make the process be with considerably less hassle.
Image 1 — Common architecture for servicing Chinese users from another country (source: Alibaba Cloud)
What If I Want to Expand My Chinese Operations?
Once mainland operations are established, working with local cloud operators significantly expands market access. At this point, you’ll probably need to gather data about your Chinese customers and transactions. Similar to Europe and the US, personal user information must be processed within China, which obliges local storage and computing power.
Customers already on Alibaba Cloud can easily access the necessary infrastructure to immediately commence development work. For example, provisioning a Kubernetes cluster can immediately start to schedule computing workloads. Data can reside in petabyte-scale stores that are encrypted at rest and in transit. Alibaba Cloud is fully PCI DSS-compliant and holds the same ISO certifications as cloud providers familiar to international customers. And when it comes to big data, extensive machine learning and AI capabilities can process the information as it comes in, offering businesses the opportunity to find the next market gap.
Next, given that Alibaba Cloud resources in any region can be interconnected with each other, the end results can be pushed to Europe or the US. The Chinese cloud provider thus serves as an important business gateway to these billion-plus consumers.
Image 2 — Interconnected cloud environments around the world (Source: Alibaba Cloud)
How Do I Work with Alibaba Cloud?
The easiest way for international companies to establish an operational relationship with Alibaba Cloud is with Xebia. Thanks to its strategic partnership, Xebia enables international companies to build bridges to Chinese customers. Xebia Software Development, a specialist in cloud-native software engineering, and its own cloud transformation company, Binx.io, have the necessary skills and know-how to accelerate the implementation of tech stacks on Alibaba Cloud. Knowledge sharing underpins everything we do at Xebia, so anyone willing to understand how Alibaba Cloud works can benefit from our technical know-how at local meetups.
Xebia’s love for China extends beyond technology. Xebia Digital Strategy recently took clients on a trip to several important innovation hubs in China. Witnessing the growth and innovation first hand, Xebia’s team can help you to understand the Chinese market better and spark new ways of thinking about the opportunities there. Together with Alibaba Cloud, the team at Xebia hope to encourage everyone to look further than just volume numbers or catchphrases about China’s boom. Together both companies hope they can bridge the gap, overcome prejudice and explore the real breakthroughs that expansion into China offers you.