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Alibaba helps foreign tech firms enter China via the cloud

Chinese e-commerce giant Alibaba is partnering with international technology firms such as SAP to help them enter the Chinese market, a region that foreign companies often struggle to compete in.

Alibaba Cloud, the cloud computing arm of the New York-listed company, will allow foreign firms to bring their software products into China using Alibaba's infrastructure.

The 11 technology firms are from the United States, Europe, Japan and Thailand and include the likes of SAP and HERE, the mapping system owned by a conglomerate of German carmakers including Daimler.

"Selling into China is not easy. First you would need infrastructure help from someone like Alibaba Cloud where we have the best data centers and network. Secondly, you would have to work with local regulation issues because unlike other countries, China requires cloud operators to hold certain licenses around data regulation. That is where we can help. We help them comply with local regulation," Sicheng Yu, general manager of Alibaba Cloud Global, told CNBC by phone.

Alibaba Group Executive Chairman Jack Ma.
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Alibaba Group Executive Chairman Jack Ma.

Many of the partners that Alibaba has teamed up with have their own software products that run on the cloud. But bringing those to China can be hard work. So those pieces of software will run on Alibaba's cloud which already has the infrastructure such as data centers and a large group of customers in place.

When customers are looking for cloud services, not only will they be able to access Alibaba's products, but services from its partners will also be available. Sicheng Yu said this does not threaten to cannibalize Alibaba Cloud's own business.

"We hold a very open attitude towards all external players in cloud space. We just want Alibaba cloud to be the one-stop shopping place which provides the most comprehensive options to customers," the executive said.

Not only does this give international companies access to China, but it also allows Alibaba to expand its own offering with products that it doesn't make, all while being hosted on its cloud.

Alibaba Cloud has over 2.3 million customers, including more than 500,000 paying customers. Like Amazon, Alibaba has been trying to expand beyond its core e-commerce products to diversify revenues. Its cloud unit has become the fastest-growing business segment for the company with revenues up 175 percent year-on-year in the three months ending March 31. However it is still a small business for Alibaba accounting for just 4 percent of totally revenues.