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Cloud wars: Amazon, Alibaba make big moves

Alibaba's cloud division has opened a second data center in Silicon Valley while Amazon has announced a slew of new features for its cloud service, as tech giants jostle for the top spot in a rapidly growing market.

Aliyun – the Chinese e-commerce titan's cloud business – said it is to open its second U.S. data center is a bid to address the "increasing demand for affordable and secure, mission-critical cloud computing". The Silicon Valley data center is Alibaba's ninth globally as it aggressively pushes its cloud business.

By having an increasing number of data centers spread worldwide, Alibaba is hoping fast-growing start-ups, especially those in Silicon Valley, will begin to use its services as they look to tap the Chinese market.

"Our data centers are typically located in key innovation and commerce hubs around the world," Ethan Yu, vice president of Aliyun, said in a press release Friday.

"Our second U.S. data center is situated in Silicon Valley which is the epicenter for technology innovation worldwide."


Alibaba Group Executive Chairman Jack Ma.
Getty Images
Alibaba Group Executive Chairman Jack Ma.

The move comes after Alibaba opened a data center in Singapore in August and chose it as the site for its overseas headquarters. At the same time, it struck a series of partnerships earlier this year – in including one with Intel – to allow it to use existing data centers built by its partner companies to push its own cloud services.

Cloud computing is one of Alibaba's smallest units, accounting for just 2 percent of revenues. But it is also the fastest growing with revenues hitting 485 million yuan ($78 million) in the three months ending June 30, a 106 percent rise from the same period last year.


Amazon firing ‘starting gun’

At the same time, U.S. competitor Amazon is making moves to bolster its cloud offering. Amazon Web Services (AWS) – the company's cloud division – unveiled new tools and services on Wednesday to help big enterprises migrate to the cloud more easily.

And on Friday, AWS announced new division to support the fast-growing Internet of Things (IoT) market. This relates to smart devices such as lightbulbs or smoke alarms that are connected to the internet. AWS's new service will allow developers to link these devices to Amazon's cloud to allow them to communicate with each other and remote servers in order to process data and carry out their tasks.

The IoT is an area Amazon has been heavily focused on. It sells a speaker called Echo which has a built-in virtual personal assistant called Alexa which can carry out tasks such as searching the internet for answers you ask it, much like Apple's Siri. And in March, Amazon bought a company called 2lemetry, a platform to manage internet-connected devices.

Analysts said the IoT announcement is significant.

"AWS is aiming to become a one-stop shop for IoT developers," Martin Garner, senior vice president at CCS Insight, told CNBC by phone.

"This is the starting gun being fired in IoT and there is a long road map of developments to come and we expect a lot of acquisitions to come of the smaller companies that have specialist skills."