Alibaba to separate cloud, AI and business messenger divisions

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Seven weeks after Alibaba announced its historic restructuring plan to split into six independent companies, the giant is gearing up to spin off its intelligence group.

Alibaba went public in New York in 2014, making it the largest IPO at the time. Alibaba sought a secondary listing in Hong Kong shortly after Hong Kong eased rules on dual-class structures in 2019, allowing the founders to retain some control while opening the company to outside investment. Rising tensions between the United States and China have also led many Chinese companies to exit the Nasdaq and New York Stock Exchanges in recent years.

“We are taking concrete steps to extract value from our business, with our board of directors approving a full spin-off of Crowd Intelligence Group through a stock dividend to our shareholders, and Crowd Intelligence Group launching as an independent public offering. We are pleased to announce our intention to become a company,” said Alibaba Group Chairman and CEO Daniel Zhang in today’s earnings call for the company. Mr. Zhang is also one of the members of Cloudarm’s board of directors.

Alibaba aims to complete the spin-off within the next 12 months, and plans to bring strategic outside investors into the group through private financing.

The cloud business generated $2.7 billion in revenue in the first quarter, accounting for 9% of Alibaba’s total revenue. (My colleague Alex is looking into the financial details of his spinout from Cloud. Keep an eye on this story.)

Fusion of AI and cloud

Alibaba’s Cloud Intelligence Group may not be very familiar to you, but think of its main product lines loosely as “AWS + Slack + OpenAI.”

Its cloud business, Alibaba Cloud, dominates the Chinese market. Alibaba Cloud will become the world’s 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 this and Alibaba ranks fourth in the fourth quarter of 2021, according to Synergy Research Group, another market insight firm.

Alibaba’s Dingtalk, an enterprise chat app and productivity platform, says it will have over 600 million users by Q3 2022, with 15 million paying daily active users and 23 million enterprise users. The company previously announced.

Alibaba’s flagship large-scale language model, Tongyi Qianwen, currently falls short of GPT-3’s technical prowess and influence, but is one of China’s most promising alternatives to text-generating AI. It also has the advantage of being applicable to various Alibaba products. In fact, the integration first started with his Dingtalk co-pilot.

It’s no surprise that Alibaba groups its cloud business and AI research team under one umbrella, as the two work closely together. With each new advance in AI, the amount of computational power required to train data grows exponentially, and so does the cost.

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

“We announced a new instance family that offers the same level of stability and offers up to 40% cost savings. We have reduced the prices of some of our products by up to 50%,” the company said.

The timing seems right. Earlier this week, the Chinese government released a draft policy calling on cloud providers to work more closely with AI companies to support all the computing resources they need.

“We believe these moves will help our customers accelerate public cloud adoption in China and open up new opportunities to leverage AI technology for enterprises,” said Alibaba.