US-based cloud company Salesforce has entered into a partnership with Alibaba, the Chinese technology giant, as the world’s number 1 customer relationship management company, seeks to gain a huge chunk of the booming $12 billion clouds computing industry of China.
This tie-up is a validation of the leadership of Alibaba in cloud services, especially in China (that is the largest economy of the world in terms of purchasing power parity). It is also an important example of the sharpening focus of Alibaba on the business side of its international growth and the internet ecosystem. According to reports from IDC and Gartner, the cloud business of Alibaba was ranked number one in the public cloud market of China and number three in the global cloud market in 2018.
In a blog post, Salesforce said Alibaba will become the exclusive provider of Salesforce to customers in Hong Kong, mainland China, Taiwan, and Macau. The post further reads that Salesforce will become the exclusive enterprise CRM product suite sold by Alibaba.
The CRM platform of Salesforce includes Service Cloud, Commerce Cloud, Sales Cloud, and Salesforce Platform. In a statement, Salesforce said more and more of our multinational customers were asking us to support them wherever they do business around the world and this is why we have announced a strategic partnership with Alibaba. Salesforce further added that the secure, advanced infrastructure and knowledge of these markets will empower our customers with a solution that meets the needs of local businesses.
This partnership comes at a time when a number of the primary competitors of Salesforce are blaming the troubled US-China tensions for poor software sales in Asia. Oracle, one of the biggest competitors of Salesforce, made as many as 900 employees redundant from its Chinese team. SAP, the largest software company in Europe, recently blamed the trade war between the US and China for its disappointing second-quarter profits.
In 2018, total spending on private and public cloud infrastructure in China reached #12 billion that was an increase of approximately 75 percent year on year and accounted for 12 percent of the global market. These trends are likely to improve further as organizations in China are becoming more sophisticated than ever by using data and cloud technology to offer services to customers and their back-office requirements.
Jerry Liu, head of Hong Kong and China internet research for UBS, remarked China is getting closer to an inflection point in the adoption of Software as a service (SaaS) by businesses.
Overall, only about 10 percent of Salesforce revenues in the quarter ending April 30, 2019, originated from Asia compared to 70 percent from the Americas and 20 percent from Europe. This alliance between Salesforce and Alibaba means the CRM giant will now gain an instant head start to pursue sales in China. Under Chinese regulations, foreign groups are required to work in an association with a domestic organization to process and store data from Chinese users. On the other hand, Alibaba can now offer this service to different organizations selling through its highly-successful eCommerce platforms.