Alibaba dismantles the cloud, artificial intelligence and business messaging unit

Image credits: Alibaba Group CEO Daniel Zhang’s news conference regarding a $2.9 billion stake in Sun Art Retail Group (Photo Vivek Prakash/Bloomberg via Getty Images)

Seven weeks after Alibaba announced its historic restructuring plan to split itself into six independent companies, the juggernaut is preparing to dismantle its intelligence group.

Alibaba went public in New York in 2014, marking the largest IPO at that time. Not long after Hong Kong relaxed rules around dual-tier structures, which allow founders to retain some control while opening the company to outside investment, in 2019, Alibaba sought a secondary listing in the city. The rising tension between the United States and China has also prompted many Chinese companies to back out of the NASDAQ and NYSE in recent years.

“We are taking concrete steps toward unlocking value from our business and are pleased to announce that our Board of Directors has approved the full spin-off of the Cloud Intelligence Group via a dividend distribution to shareholders, with the intent of becoming an independent, publicly listed company,” Daniel Chang, Chairman of the Board And CEO of Alibaba Group, announced in the company’s earnings report today. Zhang is also a member of the cloud arm’s board of directors.

Alibaba aims to complete the subsidiary streams in the next 12 months and plans to include external strategic investors in the group through private financing.

The cloud business generated $2.7 billion in revenue during the first quarter, making up 9% of Alibaba’s total revenue. (My colleague Alex took a deep financial look at cloud data. Stay tuned for the story.)

The marriage of AI and the cloud

You may not be familiar with Alibaba’s cloud intelligence group, but you think of its main product lines as almost “AWS + Slack + OpenAI”.

Alibaba Cloud dominates its cloud business in the Chinese market. Globally, Alibaba Cloud was the third largest Infrastructure-as-a-Service (IaaS) public cloud provider in 2021, according to market research firm Gartner. Add platform as a service (PaaS) and private cloud to the mix, and Alibaba ranked fourth in the fourth quarter of 2021, according to another market insights firm, Synergy Research Group.

The company previously said that Alibaba’s Dingtalk, an enterprise chat application and productivity platform, had surpassed 600 million users as of the third quarter of 2022, with 15 million daily paid active users and 23 million enterprise users.

Tongyi Qianwen, Alibaba’s flagship big language model, currently doesn’t come close to the technological prowess and impact of GPT-3, but it’s one of China’s most promising alternatives to AI for text generation. It also has the advantage of applying to a range of Alibaba products. In fact, integration has begun, first with the copilot for Dingtalk.

It makes sense for Alibaba to bundle its cloud business and AI research team under one umbrella since those two go hand in hand. With each new breakthrough in AI, the amount of computational power needed to train data increases exponentially—and so does the cost.

Interestingly, Alibaba mentioned in its quarterly report that it is working to make cloud computing “more accessible and convenient.”

We’ve announced a new instance family that delivers the same level of stability and up to 40% cost savings. For existing products, we have reduced the prices of some of our core utility products, including computing, storage, networking and security products, by up to 50%.”

The timing seems right. Earlier this week, Beijing unveiled a draft policy calling on cloud service providers to work closely with AI companies and support them with all the computing resources they need.

“We believe these moves will help our customers increase public cloud adoption in China as well as unlock emerging opportunities to take advantage of enterprise AI technology,” said Alibaba.

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