Alibaba heralds 'data intelligence' era, but likely faces security concerns over Chinese ties

Chinese tech vendor will likely face spillover concerns over security as it looks to become a hardware and software powerhouse with the launch of its Hanguang 800 artificial intelligence chip, but the thing that will prove to be a valuable proposition will be its ties to China.

HANGZHOU, CHINA -- Alibaba Group is touting the importance of "digital and smartness" in driving future digital economies and hopes to build up its capabilities -- both hardware and software -- to help businesses fully digitise their operations. In doing so, it will inevitably face concerns about security due to its Chinese roots, though, it is this heritage that offers a strong value proposition for many of its global enterprise customers.

A year after announcing plans to develop its own artificial intelligence (AI) chip, Alibaba on Wednesday officially launched the Hanguang 800 neural processing unit (NPU) at its annual Apsara Computing Conference, where it unveiled its ambition of becoming a hardware and software powerhouse. The Chinese internet giant believes this will be critical as it heralded a new "data intelligence" era, which it said would drive the company's growth moving forward.

Alibaba's executive chairman and CEO Daniel Zhang said during his keynote: "The launch of Hanguang 800 is an important step in our pursuit of next-generation technologies, boosting computing capabilities that will drive both our current and emerging businesses while improving energy efficiency. This is the first time we've used our own self-developed hardware framework, while incorporating our algorithms, in the chip design."

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The AI chip was touted to clock up to 78,563 IPS and computation efficiency of 500 IPS/W in the ResNet-50 test.

Alibaba, in fact, has been using the NPU internally within its business operations, specifically to power product searches and automated translations on its e-commerce sites, personalised recommendations, advertising, and intelligent customer services.

Thanks to digitisation, Zhang said consumption was now driven by data intelligence -- enabling consumers to better express their needs -- and supply chains have been transformed, leading to new processes, logistics, branding, and new products and categories.

To address these developments, he noted that Alibaba had been building out its ecosystem and integrating key capabilities in AI, cloud, and analytics.

"Today, we are merging our commercial ecosystem with infrastructure services, from logistics, finance to cloud computing, into a one-stop-shop solution we call the 'Alibaba Business Operating System'," he said. "Supporting brands and merchants to make their digital transformation is how we can make it easy to do business anywhere in the digital era."

Specifically, the Chinese vendor aims to have its services be used across a wide range of scenarios and verticals -- all of which would be driven by data intelligence. As more data is generated across different scenarios and use cases, he underscored the need for Alibaba to develop the necessary capabilities to help its customers achieve "end-to-end digitisation" and facilitate the efficient use of data.

Zhang said: "Data is the crude oil while computation capability is the engine. So it's important we become more capable in computation power, but also become smarter. It's a combination of volume and value, quantity and quality. Only then can we see the rise of data intelligence."

China heritage both a barrier and value proposition

But will its increased focus on data stoke current concerns about security, stemming from the US government's calls to ban Huawei's 5G equipment, and impact Alibaba's cloud success outside of China?

Unfounded or otherwise, such concerns will continue to hang over Chinese tech players such as Alibaba or Tencent, acknowledged Dane Anderson, Forrester's vice president, research director, and region manager, who noted that perceptions and doubts were hard to disprove.

Speaking to ZDNet on the sidelines of the conference, he likened the unease about security to a "digital bogeyman" and one that will continue to pop up where Chinese vendors are concerned.

In response to this current climate, Anderson echoed views that businesses would likely establish two separate technology strategies -- one for China, and another for the rest of the world.

However, he stressed that this did not alter the fact that Alibaba had made significant progress in terms of innovation and offered a valuable springboard for global companies looking to enter the Chinese market.

For several of its global clients, such as General Motors and Starbucks, China is their biggest or second-largest market and this helped open the door to engage with Alibaba, noted the Forrester analyst.

Furthermore, more companies have been looking to the Chinese internet giant as a source of innovation, he said, adding that Alibaba is widely recognised particularly for its success in e-commerce and mobile payments.

The tech vendor is now further expanding its focus into new areas including blockchain, AI, and Internet of Things (IoT), Anderson said. So enterprises are finding they can tap Alibaba as a platform and testbed on what they can innovate, and bring such development efforts to the rest of the world.

The vendor also has been building out its partnership network, roping in industry players like Salesforce.com and SAP among other major consulting firms that are keen to tap into the Chinese market, he said.

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He added that Alibaba has been building out its data centre footprint and is among Chinese internet players that have invested billions into the Southeast Asia region, a region that has been neglected somewhat by other global players.

Pointing to discussions at the Apsara conference, he said the vendor was now focusing its efforts on selling "scenario-driven" services and linking these back to its cloud infrastructure. So rather than simply pushing its cloud capabilities, it was aiming to draw customers to its experience in selling luxury brands or mobile payment services, all of which could run on its cloud platform. 

Tapping ecosystem as differentiator in global cloud competition

Alibaba, though, faces strong competition from global players such as Amazon Web Services (AWS), Microsoft Azure, and Google.

Asked how it differentiated from these competitors, Alibaba's president of global ecosystem Ken Shen said at a media briefing that the company's cloud was powered by data intelligence and supported its complex business operations within its own commerce economy.

Shen also noted that China and Asia-Pacific were high-growth markets and its strong footprint in this region offered a one-stop shop value proposition unique from global competitors such as AWS, which has been appealing to companies keen to penetrate the China and Asia-Pacific markets.

Asked then if enterprises would put aside potential security concerns to hop onto Alibaba's cloud ecosystem, Anderson said it would depend on whether the Chinese vendor succeeded in exporting its domestic success story.

The Forrester analyst said: "If there's a scenario developed in China that has worked really well, is affordable, delivers high business value…if they can provide the service faster…and there's no alternative in the market, some enterprises will be [willing] to deploy it and they will [be able] to expand it out to the rest of the world."

He added that Alibaba has been investing on innovation and technologies that its competitors did not have, such as blockchain, AI, IoT, and quantum computing.

The challenge, though, would be how quickly it could scale outside of China and secure greenfield customers, which typically stick with their initial cloud provider once locked in, to achieve a network effect, said Anderson. He noted that AWS and Microsoft were growing rapidly in the region and snagging large numbers of such customers.

He added that Alibaba would have to continue driving awareness of its brand as an enterprise cloud provider.

And with its push now into hardware, following the launch of its AI chip, he noted the Chinese vendor would have to make choices and priorities intelligently. Its fintech push, for instance, has created questions around possible competition and conflict -- from its e-commerce platform -- against retail customers.

Forrester's principal analyst Charlie Dai added that engineering collaboration between software and hardware has become increasingly critical to unleash the full potential of AI. But while investment in AI chips is now an essential move for industry players, the key here is the establishment of a digital ecosystem around the chips, from infrastructure software to applications, Dai told ZDNet in an email.

Based in Singapore, Eileen Yu reported for ZDNet from Apsara Computing Conference in Hangzhou on the invitation of Alibaba Cloud.

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