Amazon’s Reported $1B Spend On Microsoft 365 Shows ‘New Outlook’ On Cloud, Partner Says
Amazon reportedly is committing over $1 billion to Microsoft, its largest cloud rival, to buy Microsoft 365 licenses for 1 million Amazon employees. AWS and Microsoft are fierce rivals in the cloud computing market.
Amazon is giving its toughest cloud rival a $1 billion check to become a large Microsoft 365 cloud customer as it appears Amazon is more willing to partner with its competitors.
“It’s so interesting because Amazon has its own productivity toolset and offerings, yet they’re deciding not to use it or invest in it, and instead give $1 billion to a direct competitor,” said one top executive from a solution provider that is a large Amazon Web Services partner but also partners with Microsoft.
“Amazon is the biggest cloud company in the world and they’re giving a ton of money to the No. 2 cloud company—to buy their competitor’s cloud products,” said the executive, who declined to be identified. “I just think the generative AI phenomenon that’s happening this year is giving [Amazon and AWS] a new outlook on everything.”
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Amazon has committed more than $1 billion over five years to secure more than 1 million Microsoft 365 license users, according to a report by Insider. The 1 million seats will be used by Amazon corporate employees as well as workers in frontline roles, Insider reported.
Amazon’s cloud business, AWS, owns 32 percent share of the global cloud market as of second-quarter 2023, followed by Microsoft at 22 percent share, according to data from Synergy Research Group.
Not Typical For Amazon To Give Microsoft Scale
Amazon does have its own collaboration products including its videoconferencing offering Chime and its content collaboration and storage service WorkDocs.
However, it appears Amazon’s own offerings lack the same capabilities as Microsoft 365 such as with Teams, which directly competes with Chime. AWS has over 200 cloud services, although its cloud-based productivity offerings are not as popular compared with Microsoft 365 and Google Workspace.
Amazon currently leverages on-premises versions of Microsoft Office products, Insider reported, and had previously chosen to stay off Microsoft’s cloud products because it didn’t want to store anything on its competitor’s cloud infrastructure.
The sheer scale of the $1 billion deal is unprecedented for Amazon in terms of giving a rival such a large contract. So much so, that groups within Microsoft’s Office and security organizations are reportedly starting to scale up in order to meet the demand.
“We do millions in AWS sales. I have complete faith that AWS will continue pushing innovation,” said the executive CRN spoke with. “They just have a different outlook right now. AI is everything to AWS. And Microsoft is about to push AI features in 365. … We need to wrap our heads around the fact that AWS will create business partnerships with anyone and not let it distract us.”
Amazon and Microsoft did not respond to comment on the matter by press time.
Microsoft To Roll Out Generative AI To 365
Amazon will reportedly start setting up the new Microsoft systems early next month in parallel with Microsoft injecting new generative AI capabilities into 365.
Via its Copilot AI tool, Microsoft is giving Teams, Word and its other cloud-based applications in its 365 portfolio a GenAI shot in the arm.
“Copilot is one experience that runs across multiple surfaces,” said Microsoft CEO Satya Nadella last month. “It brings the right skills to you when you need them. It adapts to you. You no longer have to be the orchestrator of your apps, operating systems and devices. We are building Copilot into all of our most-used products and experiences and allowing you summon its power as a stand-alone app, as well as from Bing, on Edge, to Microsoft 365, and the newest versions of Windows.”
General availability for Microsoft’s Copilot tool for enterprise customers will start on Nov. 1.