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Amazon to sign $1bn cloud software deal with Microsoft

It appears the tech giant is replacing on-premises licenses with cloud software from one of its biggest rivals.

By Ryan Morrison

Amazon is expected to sign a deal worth at least $1bn with rival Microsoft for cloud software and services. The contract will see Amazon get access to Microsoft 365 for more than a million corporate and frontline workers. The move is likely to see Amazon moving on-premises licences to cloud-based agreements for Microsoft’s Office productivity suite.

Despite being competitors in the cloud market, Amazon is a major Microsoft customer (Photo:  Tada Images / Shutterstock)
Despite being a competitor in the cloud market, Amazon is a major Microsoft customer. (Photo: Tada Images/Shutterstock)

The two companies are the biggest players in the public cloud market, with Amazon’s AWS platform leading the way, ahead of Microsoft Azure. Despite this competition, Amazon is a user of Microsoft’s software tools, and the move to subscription-based versions, first reported by Insider, is likely part of Amazon’s wider digital transformation.

Amazon does produce its own WorkDocs service that provides enterprise storage and sharing for documents with mark-up capabilities, but this does not offer the power or functions of Microsoft 365. The company also produces Chime, a secure enterprise messaging service similar to Microsoft’s Teams, but it appears Amazon employees will still utilise the full Microsoft productivity suite.

According to a report by GlobalData, Amazon’s digital transformation programme has been focused on the use of AI, robotics, drones and a shift from on-premises to cloud services, primarily through AWS but also utilising other providers.

Amazon spent $51.5bn on IT last year and the bulk was earmarked for new software, network, communications and hardware from vendors. Some of this will be towards boosting its GPU provision in the wake of AI demand but will include the reported $1bn deal with Microsoft.

A five-year Microsoft deal for Amazon?

The deal apparently covers five years and will see Amazon acquire a million Microsoft 365 seats, according to a source familiar with the deal who spoke to Insider.

The changeover from on-premises to cloud versions of Microsoft’s Office and productivity software licencing is expected to happen over the next month. It isn’t clear to what extent Amazon will utilise the Copilot AI software, which comes bundled with Microsoft 365 for an additional fee.

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Microsoft is also moving to become a more AI-focused company, including its OpenAI-powered Copilot technology into Microsoft 365, Github and Windows 11. The AI tools, dubbed Copilot for Work by the tech giant, will also augment Word, Excel, Powerpoint and Outlook and see the launch of a new Business Chat app, now rebranded Microsoft 365 Chat. An enterprise-focused version of Bing AI is also being rolled out.

Read more: Microsoft Dynamics 365 Copilot brings AI to ERP and CRM

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