Alibaba Cloud, one of the four biggest cloud computing providers in the world, is to enter the South African market through an exclusive partnership agreement with leading system integrator BCX, a subsidiary of Telkom.
Alibaba Cloud is in effect a platform for a range of computing products, including databases, networking, security, analytics and big data. Its parent company is one of the world’s biggest online retail and financial services companies.
While BCX also provides cloud services, it is seen as a vendor-agnostic integrator that draws on the best available solutions for its clients.
According to BCX CEO Jonas Bogoshi, the South African market will benefit from “greater choice, competitive pricing and hyper-performing ICT and cloud technologies”.
Speaking from Thailand, where the deal was signed while he was attending a business event, he told Business Times that Alibaba had been ranked by international consulting firm Forrester Research as the top cloud provider in the world in terms of capability.
That made for a powerful expansion of BCX’s offering, while meeting a crucial need of Alibaba.
“On the African continent, their presence is limited,” says Bogoshi. “They've got few partners and their growth ambitions require them to work with somebody who's got local knowledge. They evaluated us as well as three other businesses. They looked for three things: a company with a very strong base in enterprise clients; a system integrator selling the entire stack, from applications to infrastructure; and the platform as a service.”
The latter refers to a development and deployment environment in the cloud, which tends to require strong system-integration capacity.
However, the requirement was as much for existing customer relationships, says Julian Liebenberg, BCX chief of cloud platform solutions.
“What we bring to Alibaba is intimacy with our customers, because a differentiator for Alibaba, with or without BCX, is that they're extremely customer-centric,” says Liebenberg.
“Over time, they could build up these relationships in SA or in Africa, but they aren't there right now and they chose to accelerate that through a partnership.”
The deal cements BCX’s positioning as an agnostic cloud provider, as it already has a close relationship with global market leaders Amazon Web Services (AWS) and Microsoft Azure.
Alibaba Cloud is ranked fourth behind Google Cloud. However, it is ranked third in public cloud services, known as internet-as-a-service.
According to a Gartner report released in June, Alibaba had a 9.5% market share and revenue of $8.7bn (about R155bn) in public cloud for 2021.
“While Alibaba continues to lead the Chinese cloud market, it is also poised to be the leading regional provider in Indonesia, Malaysia and other emerging cloud markets, given its local market understanding and ability to serve as a bridge to digital commerce,” the report found.
While Alibaba continues to lead the Chinese cloud market, it is also poised to be the leading regional provider in Indonesia, Malaysia and other emerging cloud markets, given its local market understanding and ability to serve as a bridge to digital commerce
Sid Nag, Gartner vice-president and analyst, said: “Regional cloud ecosystems are becoming increasingly important amid growing geopolitical fragmentation and emerging regulatory and compliance requirements, presenting an opportunity for providers with a strong regional presence.”
BCX and Telkom preside over 10 data centres across SA, with a “white space” — the part of a data centre where IT equipment is housed — floor area of 15,000m². This positions it to join the so-called hyperscalers — the giant data centre operators such as AWS and Microsoft — that can support huge upscaling of capacity demand.
Says Liebenberg: “We have about 20% capacity in these data centres. We are busy with an optimisation exercise to create hyperscaler space. This partnership is slightly different from working with a normal enterprise customer, because enterprise customers tend not to have such high power density and capacity demand.”
The further significance of the BCX partnership is that both parties will benefit from continued acceleration of the cloud market in the coming five years.
Bogoshi says that, while the IT sector is expected to grow only 4% annually from 2022 to 2026, the cloud industry is expected to expand by 30% a year.
According to consulting firm Frost & Sullivan, the South African cloud computing market is “transitioning between the introduction and growth stages”.
“The market is likely to mature over the next three-five years as more companies increase their cloud spending while migrating their workloads on to the cloud,” it said in a cloud market assessment in July.
Gartner says that worldwide annual cloud revenue will grow from $544bn this year to $917bn in 2025, overtaking traditional IT, which will grow slowly from $775bn to $868bn.
A key question is what Alibaba can offer BCX that it cannot obtain from incumbent hyperscalers.
Says Bogoshi: “Some of the applications that they bring to the market are incredible. Because most of their applications were created for the Alibaba Group, whether that's financial services or in retail, they were created there and then made available to be sold to the rest of their customers.
“A second part was that we were on a journey ourselves, and the journey has two parts. We've got our own applications but this augments us. Can you imagine bringing 200 or more options of a specific application to market? It just creates a better portfolio of products for us.
“Clients have decided that to digitise, it’s cloud first. We looked at Alibaba cloud as a scalable platform and found it’s probably the most scalable platform in the world. It handles billions of transactions per second on singles day [shopping festival] in China. That scalability is what gave us confidence that it will be able to meet the requirements of our customers.”
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