Alibaba to split into six units

The Chinese tech giant will break out cloud as a separate business

Alibaba to split into six units

Alibaba Group has announced plans to split its business into six separate units, as China prepares to ease regulation and raise support for the private sector.

Alibaba Group is a Chinese multinational company originally co-founded by Jack Ma. It has suffered in recent years as China has cracked down on Big Tech in the country, with shares losing as much as 70% of their value since 2020.

This will be the largest governance overhaul in Alibaba's 24-year history, according to the regulatory filing and company blog. It will split into six units, although the one with the most relevance for IT will be the Cloud Intelligence Group, which will cover Alibaba's cloud and AI efforts, as well as businesses like the DingTalk collaboration tool.

The other five groups are:

CEO Daniel Zhang told employees, "each business group and company can pursue independent fundraising and IPOs when they are ready" - the exception being Taobao, which will remain an Alibaba Group wholly owned unit.

Zhang himself, while continuing to lead Alibaba Group, will also take on the CEO role for the Cloud Intelligence Group.

Cloud is Alibaba's second-largest business, with an 8.9% share of the company's revenue - though it pales in comparison to Chinese commerce, the largest unit, which generated 67.6% of the company's revenue in the nine months to 31st December 2022.

Alibaba Group will take on a holding company management model under the new plans.

"The original intention and fundamental purpose of this reform is to make our organisation more agile, shorten decision making links and respond faster," Zhang told staff in a letter seen by Reuters.

In line with that, Alibaba said it will "slim down middle and back office functions at the group level," though did not share any plans for job cuts. Some of those roles will transition into the relevant business groups and companies.

China eases crackdown

Although Alibaba's split involves the breakup of a Big Tech firm - something Alibaba's Western peers have been fighting for years - it has been taken as a signal of lower government interference in the market.

The Chinese Communist Party has tightened regulations on technology companies in recent years, crushing IPOs and dampening the appetite for risk.

That has since harmed the country's economy, which has been battered by three years of strict anti-Covid policies and a housing crisis.

But while the housing market has had some support through stimulus measures, tech is not in the same place and confidence among businesses remains low.

Jack Ma's return to China this week may help. The billionaire's extended stay overseas, which kept him out of his home country for more than a year, was seen as a comment on the state of the Chinese market.

Five sources told Reuters that new premier Li Qiang has been asking Ma to return home since late 2022.

Stuart Cole, an economist at brokerage Equiti Capital, said, "It does seem something of a coincidence that this [Alibaba split] is happening just as Ma seems comfortable returning. To me it suggests something that Alibaba has been wanting to do for some time, but has been waiting for the opportunity."