Salesforce, a leading US cloud services company, has partnered with Chinese eCommerce company Alibaba to expand its footprint in the Asian software market, amid US-China trade war.
Alibaba will exclusively sell Salesforce’s cloud-based software to its customers in mainland China, Hong Kong, Macau and Taiwan, said Salesforce in a blog post.
According to Salesforce, the deal has been motivated by its multinational customers who are increasingly asking for support “wherever they do business around the world.”
There’s another motivation. Salesforce has big ambitions for growth, the company wants to more than double its annual fiscal revenue to as much as $28bn by 2023; because its recently seen slowing growth, successful expansion into the Chinese market will be very helpful.
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According to IDC, China will be the world’s largest cloud market by 2023. Growth of China’s public and private cloud markets is also about twice that of the global growth rate. By 2023, the country is expected to represent 25% of the global market, passing the US to become the world’s largest cloud market.
Roughly 10% of Salesforce’s revenues in the three months ended 30 April 2019 came from Asia, compared to 20% from Europe and 70% from the Americas.
In China, Alibaba’s cloud business dominates more than half the market, which is estimated to grow 55% to $331.2bn in three years, according to Gartner.
US-China trade war
The partnership comes after a number of Salesforce’s competitors stated that US-China trade tensions were problematic for business.
In May 2019, Oracle, the American software company, fired 900 staff from its China team, making up 60% of its research and development effort there, according to some employees, tensions between the US and China partly caused the cuts.
While SAP, the European software firm, blamed US-China trade tensions for disappointing second-quarter results that sent its shares sliding.
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