October 27, 2014
Owner of Alibaba (阿里巴巴) is known in the West as Jack Ma, but his real name is Ma Yun (马云), or if translated literaly : Cloud Ma. If we consider the fact that the word “cloud” appears one hundred times in the Alibaba’s IPO prospectus, this anectode about the Ma Yun’s name shows also very clearly that the world’s biggest e-commerce company based in Hangzhou sees itself as a major cloud services provider.
For those who would like to know more about this world-class business, I will analyze the structure of Alibaba Group and then place the focus on their IT operations. The story about Alibaba is a blueprint for successful cloud and e-commerce companies.
Alibaba’s main source of revenue is a group of e-commerce businesses:
- Taobao.com: C2C site with 7 million sellers and 760 million products. Sellers don’t pay any charge to sell on Taobao. Instead, they pay Alibaba the advertisement fees.
- Tmall.com: B2C site designed for branded products. Sellers are bigger and established companies who pay Alibaba for the hosting of their shopping site and a commission fee per each transaction. The site counts around 70’000 sellers.
- Aliexpress.com: B2C marketplace for the global individual cunsumers who want to buy things mainly from China.
- Alibaba.com: B2B wholesales site oriented towards the global buyers, bringing them in direct contact with Chinese manufacturers.
- 1688.com: B2B wholesales site for the internal Chinese market.
- Alibaba has also launched 11main.com, US-based e-commerce site, inspired by main street shopping experience and featuring upscale fashionable products.
Next, there are e-commerce supporting businesses:
- Alimama: online platform for precision marketing based on big data/ analytics of online consumer behavior, social networks analysis etc. It analyzes the effectiveness of marketing and advertisement campaigns for Alibaba customers.
- Alipay: solution developed internally by Alibaba in 2004, which helped build the confidence in e-commerce in China. It protects buyers by withholding their payments until they receive and verify the goods.
- Media and entertainment: Alizila e-commerce news portal, Tudou video-sharing web site (minority stake), and ChinaVision, acquired and renamed into Alibaba Film Business Group.
There is an interesting case with Alipay, who got spun off from Alibaba group, and was then repurchased by a group of investors, where Ma Yun holds 46%. Alipay continues to be the exclusive payment system of Alibaba businesses, but has also launched some independent and very innovative solutions like Alipay Wallet, which allows consumers to pay with their smartfornes for products and services bought in traditional shops or even book medical appointments, and Zeng Libao investment fund. This fund has 100 million users and about $92B under management (data as of end of June 2014). This is currently fourth largest money market fund in the world, and it attracted customers by simply allowing all Taobao buyers to invest surplus cash in their Alipay accounts at high interest rates and with no minimum investment or management fees.
In the end, Alibaba has its own research and development center and until now has filed about 350 patents.
Now about Alibaba IT.
Aliyun cloud services
According to their web site, Aliyun currently provides cloud services to 1’400’000 customers, most of them existing Alibaba sellers, but this also includes various government agencies, independent businesses, and more than 100 financial institutions in China. The company operates five data centers in Hangzhou, Beijing, Qingdao, Shenzhen and since 2014 one in Hong Kong. The exact number of servers is not disclosed, but it is estimated that newly-opened center in Beijing has around 10’000 servers.
In 2013, Aliyun has successfully completed the development and testing of their own massively distributed operating environment called Feitian or Flying Apsaras (Buddhist goddess of clouds). Feitian is a block of 5’000 nodes with a total of 100’000 CPU cores integrated in a single cluster, capable of running concurrently 10’000 jobs and able to sort 100TB file in 30 minutes (holding the world record until October 10 this year when it was broken by Databricks). The system is now in production and used for Alibaba’s own big data and analytics data processing. Aliyun intends to use Feitian clusters as building blocks for further infrastructure extensions. Behind this project is Tang Honggang, former Yahoo! developer of Hadoop search cluster and his team. More information (in Chinese) on this massive 5K development project can be found here.
To complement the service offering, Aliyun has established strategic alliance with key partners:
- Inspur for the infrastructure (servers, storage etc)
- ChinaNetCloud for managed servers operations (or Operations-as-a-Service)
- Neusoft for industry-specific solutions
In addition, the company plans to recrute 10’000 cloud services providers as one-stop shop solution for all IT infrastructure needs.
Service Catalog
Aliyun’s service catalog is quite comprehensive and it includes currently the following IaaS components:
- ECS: Elastic Compute Service
There are several ECS flavors (or configurations) with guaranteed service reliability of 99.999%. Available O/S images are Linux and MS Windows. As for the price, after the 6-months free of charge period, customers need to pay 52 RMB (or 8 CHF) per month for 1 core + 1 GB RAM configuration. For the outside network bandwith you need to add 23 RMB (4 CHF) per month for 1 Mbps. So, for one server of standard size you pay 12 CHF. - ESS: Elastic Scaling Service
The idea behind this service is – if your CPU usage is higher than a threshold of let’s say 80%, your workload can automatically get more processing power. The elasticity can be prescheduled based on expected peaks, or completely dynamic. Pricing for this service is determined bases on standard ECS models (see the example above). - RDS: Relational Database Service
There is choice between MySQL 5.5 and MS SQLServer. As for the price, there are many flavors, for example one MySQL database with 1GB cache and 10GB data will cost you 33 CHF per month. - OSS: Open Storage Services
Unified storage with replication on three nodes and prices of 0.175 RMB per GB per month. - OCS: Open Cache Service
Cache services based on flash disk technology, much faster than rotational hard disks. According to Aliyun, 95% of the customer I/O requests are satisfied within 1ms. Including in the service is monitoring and statistical analysis which helps adjusting the cache size. Each tenant can have up to 10 OCS instances, with capacities from 128 MB to 20 GB. The pricing is determined at approximately 30RMB per GB per month. - SLB: Server Load Balancer
- MQS: Message Queuing Service
- OTS: Open Table Service for nonstructured NoSQL data.
- OAS: Open Archive Services for data archival.
- PTS: Performance testing services which includes definition of test scenarios, test scripts and result management for testing of the performances of your cloud environment.
- ODPS: Open Data Processing Services
This service is designed for heavy processing and complex data queries of big data sets. The pricing of this service is determined based on Complexity Factor * 0.3 RMB per GB of input data. - Cloud monitoring: Real time monitoring of customer’s servers. It can be configured to send SMS, email or callback alerts. This services is provided free of charge.
- ACE: Aliyun Cloud Engine as development and app hosting environment with PHP and Java support.
- Cloud Shield: Security and firewall services, provided free of charge.
It is important to add that these services are available only to Chinese residents. In order to register on Aliyun, you need to have Chinese mobile phone number. And in order to purchase cloud services, you need to have Alipay account, which is possible only with Chinese credit card or bank account. There are some agencies helping foreign businesses set up the accounts and Aliyun cloud environment on a fee basis. But even in this case, your company needs to have valid Chinese business license.
In the end, YunOS Cloud Phone
Aliyun invested significant efforts to develop the cloud phone, which gives access to an ecosystem of hundreds of HTML5-based cloud aplications, including all Alibaba Group’s systems like Taobao and others, group-buying apps, and cloud storage for all your photos and documents. The YunOS can be deployed on smartphones, tablet computers and TV sets. Currently YunOS comes preinstalled on Haier, Tianyu and Acer mobile phones.
In addition to all these IT services, Alibaba also operates Alimail, free web based email service transfered from Yahoo!, has an important share in Weibo (mobile phone chat app), owns mobile web browser company UCWeb, mobile games platform and game development business.
Conclusion
This is a long post, but to describe what Alibaba really is, it takes efforts. The success story of their IPO is well deserved, and like in the case of Amazon, the key of Alibaba’s success is their focus on innovation, businesswise use of technologies, and mastering of rapid implementation process.