In the space of a few months, covid-19 has upended economic and social activity worldwide, sending billions of people home for months on end and causing productivity to tumble. In Asia, the first region to be affected, huge disruption occurred across what have been the world’s fastest-growing economies. The Asian Development Bank forecasts that productivity in Asia-Pacific could shrink between $1.7 and $2.5 trillion this year due to the pandemic, costing the region as many as 170 million jobs.
The Thomson Reuters/INSEAD Asian Business Sentiment Survey found that business confidence across the region slumped to an 11-year low as of Q1 2020; South Korea’s Markit Purchasing Managers Index dropped to its lowest level since January 2009, and the Bank of Japan’s Tankan Survey in March pointed to the lowest business confidence in seven years. Few, if any, business sectors are unscathed.
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Forced to adapt
The impact on the retail sector has been dramatic and touched every part of retailers’ business models—an overnight shift to full reliance on digital channels, disruption and lags in supply chains, and a completely new way of working for teams. Alibaba is working with many businesses across Asia-Pacific as they navigate the new operational environment. “The change of lifestyle and consumption is leading to a revamp of business models,” says Selina Yuan, president of international business at Alibaba Cloud Intelligence, noting that as companies embark on a digital transformation, they also need to optimize efficiency and minimize investments.
A case in point is Kopi Kenangan, an Indonesian venture capital-funded coffee shop chain with 345 stores nationwide. According to Fengping Zeng, the chain’s chief technology officer, the business saw a sudden and near-total shift in customers' purchasing behavior from dine-in to online delivery since Indonesia went into lockdown in March 2020. “This sudden onset increased challenges in all aspects of our business, from supply chain management to demand fulfilment, and required us to adapt our supporting systems quickly.”
The shift to cloud
IT played a key role, Zeng explains, in helping build the resilience the business needed to bounce back after the pandemic. “We needed to downgrade our servers to save costs, and we also want to increase capacity once the lockdown is over. We used the elastic capacity expansion utility in Alibaba Cloud for our product clusters, which automatically downgrades and upgrades resources according to traffic volume. As our business grows, customers will have new expectations, requiring more features, a smoother experience, and greater service availability.”
Using digital channels to grow revenue has been a key objective for many customers, says Yuan. which involves growing search, recommendations, and other customer service functions. This creates an obvious need for “robust, resilient, secure and flexible infrastructures, as well as scalable intelligent tools.”
Cloud computing and intelligent analytics are in a pivotal position to meet such growing demand. Indeed, research indicates that the pandemic is serving to accelerate cloud adoption in Asia: Korean investment bank Mirae Asset recently published a report in which it estimated that China’s public cloud spending would grow 58% in 2020, to $19 billion, as the rapid shift to online business platforms makes demand for cloud-based technology stronger than ever before. This will also increasingly include small- and medium-sized enterprises (SMEs) that are new to the benefits of digital transformation.
“As enterprises and SMEs move more of their critical businesses online, they will increasingly look for trusted cloud vendors to support their online footprint in an efficient, resilient, and secure way,” says Yuan. The simplicity of off-the-shelf tools will further catalyze digitalization. “When businesses can purchase cloud products on demand, and scale cloud resource consumption up and down based on their actual needs, going onto the cloud actually helps them with easier access to digital tools and best-in-class technologies in a cost-effective way—and access insight and intelligence that could see them emerge from the crisis even stronger. This is especially true for SMEs, who can capture the opportunities arising from cloud intelligence without heavy upfront IT investment.”
At Kopi Kenangan, digital transformation has been geared toward flexibility, says Zeng. “We built our services on top of Kubernetes (an open-source platform) and related container technologies, which can monitor and maintain server health. The Kubernetes platform also allows us to do fault management any time, which gives us flexibility to fix issues more nimbly.” As a mid-sized business, a key benefit for Kopi Kenangan is being able to access Alibaba Cloud’s expertise and resources. This is particularly important in emergencies: “cloud providers offer a lot of tools and systems with disaster recovery support, and those tools can be configured by a mid-level engineer,” which increases the company’s self-reliance.
Never let a crisis go to waste
The covid-19 pandemic offers a unique opportunity for leaders to reassess business strategies, especially as the cloud has become an imperative for businesses of all sizes to accelerate their digital transformation. Yuan believes that technology decision-makers can take this time to ask themselves, “What are the bottlenecks that we are trying to solve? How do companies use digital technologies in certain scenarios? What is the ROI needed?” To take advantage of increased traffic and grow revenue, Tokopedia, a fast-growing shopping platform in Indonesia, uses Alibaba Cloud infrastructure to host their site and its e-commerce solution to support image search and live streaming in order to offer more personalized shopping experience for its consumers. Tokopedia worked with Alibaba Cloud closely to carry out an effective localized solution.
Cloud transformation will not only provide firms with capabilities to recover from the crisis more quickly, it might serve as strategic lever, allowing business leaders to rethink priorities and resource allocation. Yuan expects that in this rethink, “business leaders will speed up the digitalization process to find more creative business models, and revamp IT infrastructure in the service of the firm’s broader business planning.”