Alibaba Cloud layoff plan exposed: layoff ratio reaches 20%

News on May 26: Recently there was news that Alibaba Cloud plans to lay off employees. According to industry insiders, Alibaba Cloud will conduct centralized layoffs and lightning layoffs from May 16 to May 30. The overall layoff ratio is expected to be about 20%, and the compensation method is N 3 and free social security for the next month.

Alibaba Cloud responded that in response to rumors of layoffs, the actual overall optimization ratio was about 7%, and it provided a compensation standard of N 1 1. However, such large-scale layoffs are rare in Alibaba Cloud's history.

Alibaba Cloud announced significant price cuts on a number of products at its partner conference on April 26 this year, in addition to layoffs. Among them, the price reduction of storage products is the largest, with the price of OSS deep cold archive falling by 50%; the price reduction of database products also ranges from 25% to 40%, with the RDS Etian Edition having the highest reduction. These price reduction policies were implemented on May 7 and exceeded outside expectations.

As an early domestic enterprise that entered the field of cloud services, Alibaba Cloud has been working hard to find a profit model. According to the latest financial report data, Alibaba Cloud achieved total revenue of 77.203 billion yuan in fiscal year 2023, and adjusted EBITA profit was 1.422 billion yuan, a year-on-year increase of 24%. Although Alibaba Cloud has been profitable for two years, it still decided to carry out large-scale layoffs and price cuts.

Since Alibaba Cloud has achieved profitability, why does it still need to lay off employees and cut prices? The reasons behind this are multifaceted. First, the price reduction is to maintain market share. Although Alibaba Cloud occupies a leading position in both the domestic and international markets, under the current economic situation, downstream customer demand has decreased and market competition has shifted to the stock market. Alibaba Cloud needs to reduce prices to retain customers and stabilize market share.

Secondly, Alibaba Cloud is facing cost pressure. The cost of operating cloud services is high, including basic services and resource costs, such as servers, storage devices, network equipment, and data centers. In addition, labor costs, security and compliance costs are also important expenses for cloud vendors. Since cloud service providers face numerous, diverse and diverse business entities, it is difficult to achieve profitability through economies of scale. Therefore, reducing costs has become an inevitable choice for cloud vendors.

Alibaba Cloud’s large-scale layoffs and price reduction measures will bring a series of changes to the domestic cloud service market. Alibaba Cloud's price reduction will bring competitive pressure to secondary cloud service providers, which may lead to market restructuring and increase market concentration. Price cuts may also have an impact on the pricing strategies of other cloud service providers, thereby pushing the entire market toward price cuts.

In response to increasingly fierce market competition and cost pressure, Alibaba Cloud has adopted dual strategies of layoffs and price reductions. However, this is not easy. Alibaba Cloud needs to carefully assess the impact of layoffs on the company and ensure that layoffs and price reduction measures can truly achieve the expected cost reduction and efficiency improvement effects. This reminds other cloud service providers to be alert to market changes and seek sustainable profit models when planning business development.

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