Intelligent cloud becomes a new driving force for market growth

Tech 2023-06-12 09:01:51 Source: Network

Recently, leading cloud computing manufacturers such as Alibaba, Tencent, and JD.com have issued product price reduction announcements, sparking a new round of price wars in the cloud computing market

Recently, leading cloud computing manufacturers such as Alibaba, Tencent, and JD.com have issued product price reduction announcements, sparking a new round of price wars in the cloud computing market. Behind the price reduction of cloud products is the fiercely competitive market and rapidly developing technology, marking that the cloud service market has entered a period of rapid expansion. However, experts believe that in the long run, the development of the cloud computing market is far from reaching the "ceiling". Cloud service providers want to win more market share, but they also need to continuously improve the quality of their products and services, adjust the structure and mode of cloud services, and promote the deepening of cloud services.

Seize the market at low prices

On May 23rd, JD Cloud launched its first public price comparison battle in China's cloud market, announcing its participation in the price comparison of its entire series of core products, promising to "pay for what you buy", including computing, storage, network, database, middleware, video services, and other products. It is the manufacturer with the richest product line in this round of price war, covering the service needs of industrial customers on the cloud and the entire cloud chain.

Previously, Tencent Cloud announced on May 16th that multiple core cloud products such as cloud networks and databases had their prices reduced, with some product lines experiencing a maximum reduction of 40%. The price reduction policy officially took effect on June 1st.

This round of price war began on April 26, when Alibaba Cloud announced the largest price reduction in history. The price of core cloud products was reduced by 15% to 50% across the board, and the maximum price reduction of storage products was 50%.

"The fundamental purpose of cloud service providers to actively cut prices and yield profits is to exchange prices for volume, lower the threshold for cloud use, preemptively attract more users into the cloud computing field, expand the user base and scale, so as to tap market demand and improve the Market penetration of cloud computing. In the short term, price cuts are bound to release technical dividends, promote more users into the cloud computing field, and expand market share." Wang Jing, Deputy Director of the Information Technology Development Research Office of the Institute of Information Technology and Software Industry at CCID Think Tank, said.

Pan Helin, co director and researcher of the Research Center for Digital Economy and Financial innovation of the International Joint Business School of Zhejiang University, believes that, on the one hand, the current competition for general computing power and cloud computing services is very fierce. In order to enhance competitiveness, cloud computing enterprises continue to expand their scale, cloud computing supply increases accordingly, and price war is inevitable; On the other hand, cloud computing services have entered an iterative period, with the emergence of new services and computing power, and the old services and computing power have already entered a price reduction stage.

Zhao Gang, President of Saizhi Industry Research Institute, stated that in the context of product standardization and homogenization, price wars do indeed affect users' purchasing behavior and attract some price sensitive customers. However, due to the high concentration of China's cloud computing market, the price war among cloud service providers is still ongoing among several leading enterprises. Although product prices have come down, the market competition pattern will not change significantly, and the ultimate beneficiaries will be users.

Cloud products can achieve significant price reductions, and technology cost reduction is an important factor. As Qiu Yuepeng, Vice President of Tencent Group, COO of Cloud and Smart Industry Group, and President of Tencent Cloud, said, "Tencent Cloud continuously creates the ultimate cost-effectiveness of its core products through a series of means such as technological innovation and supply chain integration. It will also further release technological dividends to users through price adjustments

The person in charge of JD Cloud stated that ultimate cost-effectiveness is an essential feature of the next generation of digital infrastructure. JD Cloud's large-scale business practices have given it a natural driving force to pursue technological cost reduction. Online retail and other scenarios have always put JD Cloud under extremely demanding tests, continuously increasing investment in self-developed technology, improving resource utilization, and ultimately maximizing cost reduction.

The person in charge of Tongxin Software believes that price wars cannot affect the quality of products and services. To this end, Tongxin Software has launched pricing methods such as permanent authorization, venue authorization, and annual subscription to meet the different needs of different users in different scenarios.

There is still significant room for development

Behind this round of cloud product price reductions is the assessment of the future development of the cloud market by major service providers.

According to Wang Jing's analysis, from the perspective of market supply, manufacturers mainly composed of telecommunications operators continue to make efforts in the public cloud market, especially in the government enterprise market, resulting in significant changes in the market competition ecology. The increasingly fierce competition has forced cloud service providers to maintain business growth through price reductions. From the perspective of market demand, small and medium-sized enterprises have a weak willingness to go to the cloud, making it difficult to expand the market. Price reduction has become an important strategy for cloud service providers to seize market share. From a technological perspective, artificial intelligence represented by ChatGPT has exploded, with its ultra large-scale artificial intelligence models and massive data requiring new requirements for high computing power, which will drive the rapid growth of cloud computing power demand. Major cloud manufacturers have taken this opportunity to launch attacks and seize customers in advance by reducing prices, building a first mover advantage.

At present, although the global cloud service market has rebounded, its growth rate has slowed down, mainly due to the delayed digitization process in various industries and limited revenue growth driven by business expansion in the existing market of the cloud service industry. In order to better cope with potential market risks, new users are more cautious in planning for cloud usage, but the incremental momentum of the cloud service market is insufficient. Therefore, insufficient cloud consumption in the stock market and limited cloud investment in the incremental market have led to a slowdown in the overall growth rate of the cloud market.

Zhao Gang believes that the cloud service market as a whole still maintains a stable growth trend and has a promising future, driven by new demands such as Internet video and webcast, industrial Digital transformation, artificial intelligence computing power and large model services, and Metaverse.

At present, China's cloud service market presents three characteristics: first, the industry cloud market continues to expand, cloud services are deeply integrated into the application scenarios of all industries, and the penetration of industry Cloud computing#Private cloud and Cloud computing#Hybrid cloud is further improved; Secondly, the intelligent cloud market is showing rapid growth, especially with AI big model services becoming a new hotspot in AI applications; Thirdly, the cloud service market of telecom operators is growing rapidly, with cloud services from China Telecom, China Mobile, and China Unicom all achieving rapid growth.

Cloud services have formed a relatively stable market pattern on the supply side, and the use of cloud has become a widespread consensus on the demand side. Although the overall cloud service market has entered a period of stable growth, in the long run, with the introduction of new large-scale applications such as generative AI and autonomous driving, there is still significant room for improvement in the cloud service market. "Wang Jing said.

Targeting the High Point of a New Round of Competition

Data shows that in the third quarter of the 2023 fiscal year, Microsoft's intelligent cloud department's operating revenue was $22.1 billion, a year-on-year increase of 16%, far exceeding market expectations. Google's cloud business also made a profit for the first time, with Earnings before interest and taxes of $191 million.

Currently, Amazon, Microsoft, and Google are the top three in the global cloud computing market, accounting for over 60% of the global market. "Zhao Gang analyzed that due to the impact of global economic uncertainty, compared to the previous fiscal quarter, the overall growth of the top three in global cloud computing has also slowed down, with a decrease of about 4 percentage points in growth rate. However, since the release of ChatGPT supported by Microsoft Cloud in December 2022, the artificial intelligence big model cloud service has injected new vitality into the Microsoft Cloud market, and Microsoft Cloud business growth has far exceeded market expectations. Similarly, Google has benefited from its efforts in the field of artificial intelligence, achieving profitability in its cloud computing business.

From this, it can be seen that intelligent clouds are becoming a new driving force for the growth of the global cloud computing service market. Cloud service providers actively lay out artificial intelligence, continuously strengthen their own technology, continuously launch new products and services, and can still find differentiated competitive advantages in the cloud service market. In the future, cloud computing vendors should prioritize technological innovation in expanding their business and find ways to create barriers and increase industry added value through technology, "said Pan and Lin.

In the face of fierce market competition, China's cloud service providers can't rely only on low-level price competition. They should work hard on product innovation, speed up the investment in new products such as artificial intelligence computing power, large model algorithm cloud, Metaverse services, and seize the commanding heights of a new round of cloud computing competition.

"First of all, we should improve the supply capacity of cloud services. We should encourage cloud service providers to strengthen the research and development of cloud computing solutions and application products, continue to enrich cloud computing products and services, continue to find their own advantages in industry expansion and scenario innovation and other fields, quickly adjust business models in line with national policies and social hot spots, and constantly improve service capabilities. At present, China's Software as a service market is still in its infancy, and we should continue to expand cloud computing Integrate and socialize applications with other traditional industries, and cultivate and improve the penetration rate of Software as a service applications. " Wang Jing said.

At the same time, targeting market demand, strengthening the integration of user needs such as small and medium-sized enterprises, and seeking breakthroughs from differences in user experience and personalized services. Improving the cloud service industry ecosystem, cloud infrastructure providers, cloud service providers, software application service providers, industry users and other parties in the upstream, midstream, and downstream of the industry chain should work together to promote the establishment of an industrial ecosystem that integrates software and hardware, and links upstream and downstream through various forms such as open source communities, co construction, open sharing, and collaborative creation.

"The public cloud needs to improve its ability to provide differentiated services, reduce prices without reducing quality, and meet user needs with better service quality and faster service efficiency. The industry cloud needs to deepen its application scenarios, create large-scale customized service capabilities, and meet the personalized needs of the industry market at a low cost. Accelerate the investment in new technologies and innovation of new products such as intelligent computing, big model cloud, Metaverse cloud, and seize the emerging market of cloud services. Actively expand overseas Market, expand new opportunities for Digital transformation in overseas markets. " Zhao Gang said.

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