The Supply Chain Matters blog highlights a published report indicating that China based Alibaba’s Cloud business unit will trim its existing workforce by upwards of 7 percent.

 

Background

In early April, Supply Chain Matters highlighted reports indicating that China based Alibaba elected to split itself into six different operating entities, each focused on strategic priorities and overseen by an existing holding company.

The six independent entities are indicated to be:

  • Cloud Intelligence Group which controls the company’s Cloud and artificial intelligence technology elements.
  • Cainiao Smart Logistics which includes Alibaba logistics services
  • Digital Media and Entertainment Group which includes online video streaming and movie business activities.
  • Global Digital Commerce Group that umbrellas Alibaba’s international E-commerce businesses and include AliExpress and
  • Local Services Group which controls Alibaba’s food delivery services me.
  • Tabao Tmall Commerce Group which umbrellas online shopping platforms that include Taobao and Tmall. Reportedly, this business group will remain totally owned by the Alibaba holding company.

Each of the other above businesses are destined to have an appointed CEO, a designated board of directors and specifically determined business objectives. Each can raise independent external funding via IPO.

Latest Development

Last week came an announcement of plans for a complete spin-off of the Cloud computing business with the intention for this division to become a reported full independent publicly listed company sometime in the next six months.

This week, Business broadcasting network CNBC, citing an informed source, reported that Alibaba will further trim upwards of 7 percent of the existing Cloud division workforce in preparation for this spin off. The report indicates that the company has begun informing staff of the layoffs and helping impacted employees to potentially move to different internal positions if they desire.

Reported was that revenues has been declining over the last few quarters, contracting two percent on a year-on-year basis in the first quarter of 2023. A further factor was noted to be social media platform provider TikTok owner ByteDance electing to move its international operations off of Alibaba’s cloud because of international pressures directed towards banning the application because of data residency concerns. The report cites quantitative industry data indicating that this Cloud unit has top share in China, along with number two market share in Asia-Pacific regions, just behind Amazon AWS. On a global level, it still trails giants Amazon, Microsoft and Google in the Cloud infrastructure market segment.

Remaining Unclear

What remains unclear with this plan is how this Cloud unit which currently supports all of the computing needs of Alibaba’s Digital Commerce, Tabao, Tmall, and Cainiao Logistics Units business units, will fare as an independent company having to supposedly compete for such business in an open market with other existing global based Cloud infrastructure and analytics providers.

Another interesting development is that this week, Amazon held its Annual Meeting of stockholders. Of the many resolutions that were voted on, there was no visible investor interest in spinning off the Amazon AWS business unit as an independent company. This will likely be the fodder of business media in the months to come, namely the contrasts of Alibaba’s strategy with that of Amazon and other infrastructure providers. This may boil down to garnering additional investment capital to compete internationally.

 

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