Source: Keerthi Vedantam/Crunchbase News

After operating as one company for 25 years, Alibaba Group, one of the world’s largest tech companies, announced on Tuesday it will split into six different business groups.

Each group  will be managed by its own CEO who will run different parts of the former China-based e-commerce giant: cloud computing, local e-commerce, global e-commerce, logistics, food delivery and media. Each will report to their own board and may seek out funding or individual IPOs, while Alibaba Group becomes a holding company.

Hoping for a faster and more nimble future

The move is not unlike what we saw in 2021, when Facebook became a subsidiary of Meta along with Whatsapp and Instagram. But Alibaba’s move is still a stunning shift for a company that spent more than two decades billing itself as one of China’s greatest tech companies with a global reach.

According to The Wall Street Journal, CEO Daniel Zhang said the breakup will improve organizational efficiency and make each new business more agile and able to compete with rivals. The move will also allow each unit to shed regulatory burdens another department has to follow. For example, the cloud unit has to follow stricter data privacy regulations than, say, logistics.

It will be interesting to see how these different businesses perform. A conglomerate like Alibaba is hard to value because it has its hand in several different industries. Lag in one affects the others. As standalone companies, each business may have a better grip on navigating its respective sector during these uncertain economic times.

As for all the resources that run under Alibaba’s different groups, such as human resources and data management, Zhang said they will be split among each new company and become more siloed as they grow.

Source: Keerthi Vedantam/Crunchbase News