When Alibaba’s former CEO, Jack Ma, passed the torch to Daniel Zhang, he established a system that rotates executives on a regular basis to ensure the company always remains agile in the fast-paced Internet world. It’s time for this year’s reshuffle – the e-commerce and cloud computing giant has a some major realignment announcements on Thursday.
The striking decision comes at Alibaba Cloud, the third largest provider of public cloud infrastructure in the world after AWS and Microsoft. Jeff Zhang, the former president of Alibaba Cloud Intelligence, steps down, while Daniel Zhang (unrelated), the CEO of Alibaba, takes over as acting president.
The timing of the restructuring leads to speculation. A little less than two weeks ago, Alibaba Cloud’s servers in Hong Kong suffered a major outage that shut down many services in the region, including major crypto exchange OKX. The system outage, which lasted up to a day for some customers, caused the incident one of the biggest among Chinese cloud providers in recent history.
Jeff is not gone, but will instead turn his attention to Alibaba’s basic research institute Damo Academy. If one of the 29 members of Alibaba Partnerships, a group of exclusive executives with great influence over the company’s direction, Zhang has played a pivotal role since joining 20 years ago. First, he was instrumental in designing the system infrastructure for Taobao, one of the world’s largest online marketplaces.
At Damo, he will continue to be responsible for IoT initiatives and Alibaba’s in-house chip development team T-Head, which has taken on new meaning as China navigates escalating technical sanctions from the US.
“For the past four years, Jeff has led the Alibaba Cloud Intelligence team to deliver outstanding results in technology innovation and industry influence,” Daniel said in an internal email to staff.
The CEO will not only take the helm of the cloud business, but also manage DingTalk, Alibaba’s business communication app that works closely with the cloud unit. As we wrote in 2020:
At its annual summit this week, Alibaba Cloud reiterated its latest strategy to “integrate cloud into Dingtalk (in Chinese)”, the work collaboration app analogous to Slack.
The tagline suggests the strategic role Alibaba wants Dingtalk to play: an operating system built on Alibaba Cloud, the world’s fourth largest infrastructure as a service behind Amazon and Microsoft. It’s a relationship similar to that between Microsoft 365 and Azure, as Alibaba Cloud president Zhang Jianfeng previously suggested in a interview (in Chinese).
It’s hard to imagine Daniel’s long-term commitment to the cloud business, which is probably why he’s given the title of acting president. As Alibaba’s second largest enterprise 10% of total sales in the second quarterthe cloud segment will certainly do its best to find the next suitable boss.
Whoever the successor becomes, it will be no sinecure. The cloud business has experienced sluggish growth in recent quarters as it loses key sources of foreign revenue. Alibaba Cloud was once the go-to solution for many Chinese internet companies expanding abroad, but with increasing geopolitical tensions, they are turning to foreign providers like AWS to cut ties with China. In this case, Alibaba Cloud reportedly took a big hit after TikTok pulled its data from its service.
As the company noted in its own words on its Call on November earnings:
“Sales from customers in [the] internet industry fell about 18%, which was mainly caused by declining revenues of the largest internet customer who has gradually stopped using our overseas cloud service for its international business, online education customers, as well as declining demand from other customers in China’s internet industry .
Domestically, Alibaba Cloud faces rivalry from its nemesis Tencent, which has a stronghold in games. It also competes with Huawei and Tianyi, the cloud arm of state telecom giant China Telecom, both of which are getting an edge in supporting government and public infrastructure.
