Alibaba Group Chief Executive Daniel Zhang announced that the company would be restructuring its cloud business unit and its Tmall e-commerce business. This comes just weeks after Zhang told CNBC that Alibaba Cloud would be the group’s main business in the future.
Alibaba will rename its cloud group the Alibaba Cloud Intelligence business group. The renamed group will be overseen by Alibaba Chief Technology Officer Jeff Zhang Jianfeng who will replace Simon Hu Xiaoming as its president.
It also formed a New Retail technology business group that will be overseen by Wu Zeming, who formerly oversaw Tmall’s technology unit. The New Retail group will integrate technological support for online shopping websites as well as off-line shopping.
This is one of the first significant restructurings for Zhang as he prepares to take over for Alibaba Group co-founder and Executive Chairman Jack Ma as the company’s chairman in September 2019.
According to a new report from independent research firm MTN Consulting, Alibaba’s cloud computing business is becoming its “most ambitious venture.” The unit comprised only 5 percent of its total business in its 2018 fiscal year, but has the highest annual growth. It grew 93 percent year-over-year in the company’s last earnings.
The report notes the venture is fueled by large investments that Alibaba has made overseas (particularly with regard to data centers), its global research and development drive (R&D), and Alibaba’s focus on developing AI-based chips and quantum computing processors.
MTN Consulting found that since 2017, Alibaba’s capex spending has outpaced its R&D spending as it established data centers in India, Malaysia, Indonesia, and the U.K. These data centers represent the cloud computing arm’s push to expand outside of its domestic market in China.
However, MTN expects this gap between capex and R&D to narrow as Alibaba announced a $15 billion global R&D push in its 2018 second fiscal quarter. This push will focus on machine learning, network security, visual computing, and natural language processing. MTN noted that the company’s pursuits in chip development and an upgrade to its logistics network would drive its R&D and capital intensities in the coming quarters.
The research firm said that the investment into AI chips is a multi-faceted investment. For one, developing its own AI chips and quantum computing processors would curtail its dependency on the U.S., where some of the biggest chipmakers reside.
In addition, the AI-chips would support its cloud business and its IoT technologies as it plans to connect 10 billion devices by 2023.
The report is part of MTN’s Webscale Playbook Series, which analyzes eight of the globe’s largest network operators. This includes Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent. The series is based on each company’s earnings reports and transcripts to asses the companies spending, relationships, strategy, and impact on the network infrastructure market.