Germantown Weekly Federal Express, Microsoft align: Enough to beat Amazon?
Fedex and Microsoft’s new alliance will bolster Fedex’s technological capabilities, but that alone won’t be enough to edge out rival Amazon, experts say.
Fedex and Microsoft announced their multiyear collaboration on May 18, focused on combining the two’s strengths in logistics and computing to give customers better insight on their supply chains.
Fedex Chairman Fred Smith proclaimed in a news release the team-up will “help revolutionize commerce and create a network for what’s next for our customers.” Satya Nadella, CEO of Microsoft, said the two will build “new commerce experiences that transform logistics for our mutual customers around the world.”
Both companies are pairing up while “sensing a big challenge” from Amazon, particularly after Fedex’s public split with the e-commerce giant, said Kumar Singh, a supply chain consultant with warehousing startup Jagah.ai.
Amazon has the advantage of being both a technology and a supply chain company, giving it the advantage over those more focused on one or the other, Singh said. Fedex’s Microsoft team-up allows it to compete technology-wise with Amazon without having to spend years developing its own cloud capabilities in-house, he said.
The first piece of the two’s collaboration is Fedex Surround, giving businesses information on any logistical slowdowns, such as severe weather or clearance issues, and how their inventory is selling in different areas. The release said it will provide an “unprecedented level of data-driven insight” for customers.
Although Fedex Surround will help in shipping time-sensitive goods, Amazon won’t notice any competitive effect from the collaboration’s services, according to Rick Watson, CEO of marketplace and e-commerce consulting firm RMW Commerce Consulting.
“In the retail and e-commerce space, Amazon is No. 1, and it’s not just because they’ve been able to dominate in e-commerce,” Watson said, comparing its current dominance to Microsoft in the 1990s. “... They’re good at everything, it seems like. That’s why everyone is trying to gang up on Amazon.”
Azure vs. Amazon Web Services
Fedex and Microsoft highlighted the use of Azure, Microsoft’s cloud computing platform, in their announcement. Azure competes with Amazon Web Services, Amazon’s hugely profitable cloud computing subsidiary.
Cloud computing services like Azure provide on-demand availability of technology such as computer servers, stor
age, software and analytics over the internet. Microsoft explains that customer payment is “typically” only for cloud services used, helping companies lower technology costs, run their infrastructure more efficiently and easily scale as needed.
Amazon Web Services remains the dominant player in the cloud infrastructure services space. As of the 2019 fourth quarter, it had 32.4% market share while Azure had 17.6% market share, according to estimates from technology analysis firm Canalys.
Fedex is likely using Azure “to incrementally boost the scale and scope of its data tracking and analytics capabilities,” said Matthew Young, a Fedex analyst at financial services firm Morningstar.
Young doesn’t view the collaboration as a significant competitive boost for Fedex. Rather, he says it’s part of the evolution of the shipping and supply chain process becoming clearer for customers via better data.
Since Fedex wasn’t going to go to Amazon for cloud computing services after their split, Microsoft remained the obvious vendor to use, Watson said.
Plus, Fedex is already familiar tapping into Azure and other Microsoft resources. In 2017, Fedex CIO Rob Carter detailed in a blog post for Microsoft that the company used it to build an application for same-day service for retailers.
“This competitive, last-mile solution extended our business — with fewer IT resources required,” Carter said.
Better for Microsoft?
Watson sees the team-up benefiting Microsoft more long-term than Fedex. The collaboration won’t transform the Memphis logistics giant, Watson said, but it does ensure Microsoft keeps a large customer.
The collaboration provides Microsoft with a flood of real-world shipping data it can use to improve its software services, Watson added.
“Microsoft got all of the benefits, save for Fedex getting good software,” he said, adding that Fedex did need to invest more in cloud-based technology and artificial intelligence.
The announcement also opens the door for Microsoft to become a larger player in the retail space, which Britain Ladd, chief marketing officer at consultancy Pulse Integration believes Nadella sees “as the Holy Grail.”
“Fedex and Microsoft partnering convinces me I’m right about Nadella’s long-term growth strategy,” Ladd, formerly of Amazon, wrote on Linkedin. “In order to be a player in retail, Microsoft must have the ability to fulfill orders. Enter Fedex.”
Microsoft-owned Linkedin will become “a social media, marketplace and e-commerce platform,” and the tech giant will use both virtual reality and voice technology to make “a new retail experience,” Ladd predicts.
Battle with Amazon ahead
Future Fedex and Microsoft services will include “more integrated ways to shop” and “faster and more efficient deliveries,” per a news release from the two companies.
Further details remain scarce, and Fedex declined an interview request on the announcement.
Fedex’s extensive delivery fleet combined with Microsoft’s ability to capture and analyze data could be a gamechanging combination as they roll out these services, according to Singh, although he cautions the two must execute their plans quickly before Amazon debuts any new competing service.
“They do have some solutions which are innovative in terms of Amazon not having it,” Singh said. “The key is how fast or scalable that solution is and how easy it is for customers to use… Amazon can execute once they have an idea — that is something they are good at.”
Reach Max Garland at max.garland@commercialappeal.com or 901529-2651 and on Twitter @Maxgarland Types.