US and Chinese Cloud Firms Battle for Indian Market Share
India is a battleground for US and Chinese tech companies, and the cloud market is no exception. Here's how Amazon and Alibaba fit into the picture.
India is the second-most populous country on earth and home to a multi-billion-dollar and rapidly growing technology sector. Within this market, US and Chinese technology companies are competing in a number of areas — including cloud services. This post examines US and Chinese cloud firms competing in India, through the lens of Amazon and Alibaba. Brought to you by Global Cyber Strategies.
The One-Liner
Amazon dominates the Indian cloud market, but Chinese tech giant Alibaba is increasing its investments and building infrastructure — with a possible leg up on Amazon in appealing to the Indian government’s vision of a robust domestic data storage and processing industry.
Who Controls India’s Cloud Market?
There are just a few dominant global providers of cloud services. In the United States, the biggest players are Amazon, Google, and Microsoft. In China, the biggest players are Alibaba and Tencent. Estimates vary on how much global market share they control. For instance:
Synergy Research Group estimates the global cloud market share for Q3 2022 to be controlled by Amazon (34%), Microsoft (21%), Google (11%), Alibaba Cloud (5%), IBM Cloud (3%), Salesforce (3%), Tencent (2%), and Oracle (2%). This count includes their offerings of infrastructure as a service (IaaS), where a third party provides hardware, storage, and networking functionalities; platform as a service (PaaS), where a third party provides the hardware (as with IaaS) plus operating systems and data management systems; and privately hosted cloud services.
Gartner estimates the global cloud market share for 2021, for just IaaS, to be controlled by Amazon (38.9%), Microsoft (21.1%), Alibaba (9.5%), Google (7.1%), Huawei (4.6%), and others (18.8%).
As case studies, this post examines the Indian market expansion efforts of Amazon, the leading US cloud provider globally, and Alibaba, the leading Chinese cloud provider globally. It analyzes data on some of their infrastructure, investments, and public relations positioning in India. Amazon presently controls the most market share in the Indian cloud market, but Alibaba is clearly intent on expanding in the country as part of its expansion in the Asia-Pacific broadly.
“Instead of competing with global companies in China, we’re competing with them in India, which is an open market.” — President of Alibaba Mobile Business Group, January 2017
Case Study: Amazon’s Expanded Infrastructure in India
Amazon by several different estimates controls the most global market share for public cloud, around 32-39% worldwide. The company’s cloud business, Amazon Web Services (AWS), is lucrative — reportedly generating $19.74B in revenue in Q2 2022 and $20.5B in revenue in Q3 2022. Multiple estimates also place AWS as the leading cloud services provider in India. In recent years, Amazon has greatly expanded its digital infrastructure presence in India, including in several technology areas:
Amazon CloudFront: Amazon CloudFront is a content delivery network (CDN), or a network of servers that store copies of online content to deliver it quickly to end users. In large part, this happens through physically placing servers closer to the end recipient of the information or data, such as in India.
AWS Direct Connect: AWS Direct Connect is a cloud service that routes data “on the AWS global network” such that it “never touches the public internet,” allowing users to create direct network connections to AWS servers.
AWS Local Zones: AWS Local Zones are servers that bring lower-latency and local data processing functions from AWS’ main cloud systems to local areas — as Amazon puts it, placing “compute, storage, database, and other select AWS services close to large population and industry centers.”
Amazon, as of November 2022, has infrastructure placed in Kolkata, Hyderabad, Bangalore, Chennai, New Delhi, and Mumbai — presently including 33 total CloudFront edge locations, 6 total AWS Direct Connect locations, and 1 AWS Local Zone. It has 3 additional Local Zones currently planned for Chennai (1), Bengaluru (1), and Kolkata (1). This is not a comprehensive picture — for instance, Amazon has multiple Availability Zones in the Asia Pacific, which are discrete data centers with “redundant power, networking, and connectivity” — but underscores the importance of cloud service provision and market expansion in India to Amazon.
The company’s expansion efforts in India continue. In November 2022, Amazon set up a second AWS infrastructure region in India and pledged to invest more than $4.4 billion in cloud in South Asia by 2030. This is not just about expanding market access through building infrastructure in and of itself. Amazon also seeks to appeal to the Indian government’s vision of a robust, domestic data storage and processing sector. When India’s parliament was developing its Personal Data Protection Bill — since scrapped and replaced with a new, shorter bill that moves away from an emphasis on data localization — a key consideration with the proposed data localization rules was boosting domestic data storage. India’s Ministry of Electronics & Information Technology released a draft discussion paper in 2020 that captured this view:
The size of the digital population in India and the growth trajectory of digital economy [sic] necessitates a strong growth of Data Centres, which has the potential to fulfil the growing demands of the country. Indian Data Centre market [sic] has seen tremendous growth in the past decade, riding on the explosion of data… This growth in data is further stimulated by adoption of emerging technologies such as quantum computing, artificial intelligence, internet of things etc. …
Need for Data Centre infrastructure [sic] within the boundaries of the country is further necessitated by the data localization provisions of proposed Data Protection Act and for protection of the digital sovereignty of the country in an increasingly connected world. India also offers advantages of having a favourable geographical location on the world map, availability of economic resources, established global connectivity through submarine cables, easy and cost-effective access power and readily available skilled manpower provides, enabling the nation to become a global Data Centre hub.
This need for Data Centre infrastructure in the country already opens up a potential opportunity for investments of the order of USD 4.9 billion by 2025.
Sure enough, India’s Union Minister of State for Electronics and Information Technology and for Skill Development and Entrepreneurship said of Amazon’s new data center and investment pledge, “As a part of Prime Minister Narendra Modi’s $1 Trillion Digital Economy vision, the ‘India cloud’ is set for big expansion and innovation. … The investments by AWS in expanding their data centres in India is a welcome development and would certainly help catalyze India’s digital economy.”
There is every indication that Amazon will continue its expansion efforts in the coming months, as critically impactful Indian technology laws, policies, and regulations (e.g., its new privacy bill) evolve in tandem.
Case Study: Alibaba’s Expansion in India
Alibaba Cloud has two cloud regions, or data center clusters, in Mumbai (Mumbai Zone A and Mumbai Zone B). The first one was launched in December 2017, with availability in January 2018, and the second one was opened in September 2018.
This expanded cloud infrastructure in India sits within Alibaba’s broader, gradually increasing investment in the Asia-Pacific market.
Like many Chinese technology companies, Alibaba has been on shakier footing in India due to its country of incorporation. In June 2020, following an India-China border clash and the deaths of 20 Indian and 4 Chinese soldiers, the Indian government banned TikTok and dozens of other Chinese apps, citing that “they are engaged in activities which is [sic] prejudicial to sovereignty and integrity of India, defense of India, security of state and public order.” (TikTok had been briefly banned in India in May 2019, for two weeks, after a court ruling that was subsequently overturned; the concerns then were not security-related but cited the risk that children were exposed to sexual predators and pornography on the app.) Without getting into TikTok and security risks here, the 2020 app bans were the first in a series of Indian government moves against Chinese tech firms.
In August 2020, given this context, Alibaba temporarily suspended its investment plans in India for six months. This was especially significant given that Alibaba had invested in at least five Indian startups from 2014-2019 that became unicorns, valued at over $1 billion. For example, in 2015, Alibaba and its affiliate Ant Group (previously Ant Financial) invested hundreds of millions of dollars in Paytm, the Indian digital payments company, at which time it reportedly had a $1 billion valuation. (Just last week, Alibaba sold 3.1% of its 6.26% stake in Paytm for $125 million. This latest move was likely, among other reasons, driven by concerns about overvaluation.) Nonetheless, Alibaba’s cloud investments in India continued apace following its 2020 investment pause.
Today, while Amazon is certainly playing into the Indian government’s push to grow the domestic data storage and processing sector, Alibaba may be doing so more explicitly. “India is a big commitment for us,” Alibaba Cloud’s India general manager said upon the launch of the second Mumbai cloud region in 2018. Responding to the data localization proposals that were still circulating at the time, he continued:
A mandate for data localization would help our business. We will respect the local law whenever it comes in. We are ensuring that our customers get the best services and security of the data is a key focus for us.
There are many competitive factors at play, but this could be one area where Alibaba has a leg up on Amazon: it has long supported data localization in India where the US company has aggressively lobbied against it. In 2018, while US giants from Google to Facebook to Visa to Amazon were trying to convince Indian policymakers that data localization was a bad policy and technology decision, Alibaba was outspokenly supportive. The president of Alibaba Cloud said in September 2018, “We need to respect laws on data security and privacy. It is the most fundamental one. We insist on localization of data. Indian data should be stored in India. That is our principle.”
He continued: “It is difficult for a Chinese technology company to build trust overseas. We have a different view from other global companies and want that India have its independent data centers.” It wasn’t just talk; simultaneously, Alibaba was investing in data infrastructure in India (as were other Chinese tech companies).
Amazon, by contrast, had spent years combatting the Indian parliament’s data localization proposals — with AWS’ president for India and South Asia remarking in January 2022:
Data localization comes with overheads. Inhibiting cross-border data flow and data sharing can deny access and benefits of the cloud technology, including big data processing, machine learning, etc. to Indian companies.
This matters because non-Indian cloud providers will look to partner with Indian counterparts (as Microsoft did in August 2019 with Reliance Jio) to expand into the market and leverage domestic server infrastructure. It’s an open question whether Alibaba’s historical and continued support for these Indian policies will give it a competitive advantage in that respect. Further, the Modi government has been known to go after foreign tech companies that do not cooperate with its wishes: police raided Twitter’s offices in Delhi and Gurgaon in May 2021 after the company labeled tweets from members of the BJP, India’s ruling party, as manipulated media; the government clearly wielded its control of access to the Indian market over Facebook’s head to pressure it into leaving up hate-filled, false, and violence-inciting posts from BJP officials. Alibaba supporting localization could help in some ways, even if small.
So, What’s Next?
Amazon has the most cloud market share in India, and Alibaba’s commitment to investing and competing in the Indian cloud services market is crystal clear. All the while, many other questions circle that were not covered in this post — such as the companies’ other financial investments in India, the specific services that AWS and Alibaba Cloud offer to Indian companies, and more. Microsoft, Google, Tencent, and other companies continue to make investments in the Indian cloud market, too. IDC estimates that Q2 2022 spending on cloud computing and storage infrastructure in the Asia-Pacific increased by 40% year-over-year.
Going forward, some key issues to watch include:
Amazon’s Continued Investments — Amazon has rapidly expanded its infrastructural presence in India and the broader Asia-Pacific, and its investments there in the coming months will indicate whether it feels the need to keep up that pace. Partnerships with Indian companies will be critical as well.
Alibaba’s Rhetoric on India’s Data Sector — It remains an open question whether (and if so, how much) Alibaba’s vocal and longstanding support for India’s data localization proposals, and efforts to boost its domestic data storage and processing industry, will help it make necessary inroads with politicians and with Indian technology companies. This is an important area to monitor.
Price Competition — In May 2021, Amazon announced price cuts for Amazon CloudFront of up to 36% in India; Alibaba and Amazon are also engaged in fierce competition in other areas in India, like e-commerce. Some analysts believe a cloud services price war looms, and not just between Amazon and Alibaba.
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