Alibaba Cloud has announced that it will soon close its data center operations in Australia and India, a move that contradicts previous commitments the company has made. Registry Regarding the stability of our presence in Australia.
The Chinese cloud giant recently revealed the decision as part of a broader infrastructure strategy update. “As part of Alibaba Cloud’s infrastructure strategic update and after careful consideration, we have decided to cease operations in our data centers in Australia and India and to strengthen our investments in Southeast Asia and Mexico,” Alibaba Cloud explained in a statement.
The company claims it has been proactive in communicating with affected customers, stating that “Alibaba Cloud has issued multiple notifications and technology migration plans to affected customers since December 2023. This timeline is particularly noteworthy given recent events.
In February 2024, The Register received word that Alibaba Cloud was planning to close its Australian operations and had already begun laying off staff. When reached for comment, an Alibaba representative responded that its Australian offices were open and no layoffs were occurring. In retrospect, this response seems evasive at best, as the decision to close had already been made at that point.
The timeline for the closures has been made public. Australian customers have been notified that data center operations will cease on September 30, while Indian customers have a shorter deadline of July 15. After these dates, data stored in the Australia (Sydney) and India (Mumbai) regions will no longer be accessible. Alibaba Cloud is encouraging affected customers to migrate their data to other Alibaba Cloud data centers.
The decision to withdraw from the Australian market is surprising, but can be partly explained by the country’s unique circumstances. Australia is a wealthy but relatively small country with a population of 27 million, where big companies such as AWS, Azure, Google and OVH already have a strong presence. Moreover, public sentiment towards Chinese companies in Australia has become somewhat negative in recent years, which could make it a difficult market for Alibaba Cloud.
However, the withdrawal from India seems puzzling at first glance. India is the world’s most populous country and, according to the International Monetary Fund, the GDP is growing at a robust 6.8%, making it the eighth largest in the world. Most technology companies see India as a market with huge potential. However, the current frosty relationship between Beijing and India likely heavily influenced the decision. The Register speculates that in the current political climate, few Indian buyers would seriously consider a Chinese cloud provider.
Alibaba Cloud’s pivot to Mexico may be a more strategic move: The company recently announced plans to open its first data center in Mexico, which appears to be tied to the growing presence of Chinese manufacturers in the country. These companies may already be using Alibaba Cloud in China (where it leads the public cloud market) and may be more inclined to use the company’s services as it expands into North America.
The choice may also have been influenced by the company’s data center design specifications. Alibaba Cloud is known for its large-scale operations, and one report said its data center sites could support 1,875 servers, each connected to eight GPUs and consuming up to 18MW. The Register suggests Alibaba Cloud’s operations in Australia are less large-scale and likely involve the use of colocation facilities.
A major Chinese cloud provider has decided to stop offering certain services and solutions. This decision is driven by the fact that it is too costly for key divisions to operate non-standard configurations in global data centers. In particular, operations in Australia and India are not viable due to low throughput, so the business case is not supported.
This strategic shift appears to be focused on areas where Alibaba Cloud can support the desired infrastructure scale and leverage existing business relationships, all of which could help potentially streamline the company’s global operations.
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