Alibaba’s Ma sees data resource to be essential as oil and water in the future

Alibaba Group Holding Ltd’s bet on data technology is driving greater investment in areas including ways to protect user privacy as it battles Amazon.com Inc. for customers globally.

The AliCloud unit of China’s biggest e-commerce operator partnered with Foxconn Technology Group for a start-up incubator program, according to an e-mailed statement sent on Wednesday. The companies also unveiled enhanced security for data communications through so-called ‘quantum cryptography’.

AliCloud opened a new data center in the US last week and plans its first for Europe next year as it spends $1 billion backing its bet that demand for processing and storage from governments and companies will boost growth in the next decade. The investment also reflects Alibaba’s own demand, with billionaire Jack Ma expecting the company to handle $500 billion of transactions this year through its e-commerce platforms.

“Data will become the biggest production material in the future, it will become a public resource like water, electricity and oil,” Ma said in Hangzhou. “With computing capabilities and data, mankind will go through changes that flip heaven and earth.”

Market Opportunity

Alibaba’s cloud business only contributes a small part of total revenue, with computing and Internet infrastructure accounting for 2.6% of sales in the June quarter, according to data compiled by Bloomberg. AliCloud generates revenue mostly by charging clients a fee for using its computing infrastructure.

“The collaboration with Foxconn is very helpful for our own innovation,” Alibaba Chief Technology Officer Wang Jian said in an interview on Wednesday. “The startups will naturally use AliCloud and use Foxconn for manufacturing and bring us more investment opportunities.”

AliCloud could account for more than $1 billion of Alibaba’s revenue by 2018 and the public cloud presents a $120 billion global market opportunity, according to research by SunTrust Robinson Humphrey Inc.

While Alibaba is investing in data centers as it battles Amazon to add clients in the US, it’s coming up against scepticism about data and Internet security given it’s a Chinese company.

“The largest markets will still be in the US, Europe and Japan,” said Steven Lu, a Shanghai-based partner at Bain & Co. “These places in the foreseeable future will continue to have entry barriers for Chinese companies.” Bloomberg