Microsoft and FedEx team up against Amazon with new tech and logistics partnership

Microsoft and FedEx will work together to develop new products and services under a multiyear technology and logistics partnership announced Monday morning.

The deal aligns the two corporate giants against a common rival, Amazon, which is increasingly leveraging its technology prowess as it builds out its own delivery and logistics infrastructure.

FedEx last year ended ground and air shipping contracts as Amazon expanded its delivery capabilities. The newly announced partnership will rely heavily on Microsoft Azure, the No. 2 public cloud platform behind Amazon Web Services, as well as Microsoft’s Dynamics 365, which competes with Salesforce and other business software platforms.

On a video call with FedEx CEO Fred Smith, distributed by the companies, Microsoft CEO Satya Nadella said the partnership will “reimagine what commerce can look like.” He noted that Smith and FedEx have been been “a visionary in this space since day one.” It’s not clear if the reference to Amazon CEO Jeff Bezos’ favorite catch phrase was intentional.

Amazon debuted a new delivery program in June 2018 in Seattle. (GeekWire Photo / Kurt Schlosser)

Microsoft and FedEx say their partnership will give businesses an “unprecedented level of control and insight into the global movement of goods.”

FedEx announced the first service from the partnership, FedEx Surround, which the companies say will let businesses track the movement and location of packages down to the level of ZIP codes in near real-time. The system will use data collected from FedEx scanners and IoT devices, with data analysis from Microsoft’s AI, machine learning and business intelligence technologies.

“We’ve been developing, over decades, the most granular information about commerce, globally and domestically, and at the local (level) and by the industry SIC level,” Smith said on the call with Nadella. “So we can make that information available in FedEx Surround so that inventory process and sales process is much more focused and discrete, which leads to a much higher inventory turn ratio, much fewer markdowns, and so forth,”

The companies explain in a news release, “This will provide participating businesses with not only enhanced visibility of a package’s location during its journey, but also knowledge of global commerce conditions and external challenges in near-real-time, such as severe weather or natural disasters, mechanical delays, clearance issues, and incorrect addresses. This unprecedented level of data-driven insight will give FedEx Surround customers the opportunity to intervene early and act to avoid logistical slowdowns before they occur to reduce friction and costs.”

Timing for the rollout will be announced this summer, they say.

Future plans could hit even more directly at Amazon’s core business. Microsoft and FedEx say they are “reimagining commerce experiences for businesses to offer consumers more integrated ways to shop, and faster and more efficient deliveries.”

This follows a pattern of Microsoft partnering with and picking up business from Amazon’s competitors, which can be reluctant to rely on AWS for their technology infrastructure despite Amazon’s assurances of objectivity. Examples in the retail realm include Walmart and Kroger.

FedEx and Microsoft haven’t yet given any indication of the underlying financial terms of their partnership. FedEx shares are up more than 7% following the announcement. Microsoft shares are up about 1 percent.


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