Caixin
Jul 25, 2019 02:04 PM
BUSINESS & TECH

U.S. Cloud Provider Enters China Amid Trade War — With Alibaba’s Help

San Francisco-based Salesforce wants to more than double its annual revenue to as much as $28 billion by fiscal 2023. Photo: Bloomberg
San Francisco-based Salesforce wants to more than double its annual revenue to as much as $28 billion by fiscal 2023. Photo: Bloomberg

(Bloomberg) — Salesforce.com Inc. unveiled a partnership with Alibaba Group Holding Ltd. to enter the Chinese software market, chasing new business in Asia despite the U.S.-China trade war.

Alibaba will sell Salesforce cloud-based software for clients’ sales, customer service and commerce needs on the Chinese mainland, Hong Kong, Macau and Taiwan, the companies said Wednesday in a statement.

San Francisco-based Salesforce, the top seller of software for managing customer relationships, wants to more than double its annual revenue to as much as $28 billion by fiscal 2023, but has recently seen slowing growth. Under co-Chief Executive Officers Marc Benioff and Keith Block, the company has expanded internationally, announcing investments and hiring throughout Europe and the Asia-Pacific region. Salesforce is entering China at a time when the U.S. government has made it harder for some American technology companies to sell products to Chinese customers, amid a flurry of tariffs on China-made goods.

Salesforce previously had a limited presence in China. Multinational customers were asking for support wherever they do business, according to the statement. Rival Oracle Corp. has reportedly been shedding workers in China, and the company’s co-founder, Larry Ellison, said in October it’s important for the U.S. tech industry and military to beat China.

Some investors have been concerned that Salesforce’s revenue growth rates are slipping, though the company continues to report quarterly sales increases of at least 20%. Salesforce has made splashy acquisitions in the past two years that will significantly contribute to revenue, including a $15.3 billion plan to buy data-analytics company Tableau Software Inc., which the company announced last month.

Alibaba’s $3 billion cloud services arm is fast becoming an important driver of its global expansion. The e-commerce giant widened its lead over Amazon.com Inc. and Microsoft Corp. in Asia’s cloud computing market in 2018, according to Gartner, which in turn helped it narrow its global gap with those two rivals.

In China, Alibaba’s cloud business commands more than half the market, which is estimated to grow 55% to $331.2 billion in three years, according to Gartner. Alibaba’s cloud business has been generating triple-digit revenue growth over the past three years, outpacing the industry.

Gartner estimates that Alibaba last year accounted for almost 20% of the market in Asia for two forms of infrastructure cloud services. Globally, Amazon leads with more than 30% to Alibaba’s 4.9%.

Contact editor Yang Ge (geyang@caixin.com)

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