Two Dow 30 stocks have signed a strategic partnership deal to take on a company that threatens the businesses of both. Walmart Inc. (NYSE: WMT) has inked a five-year deal with Microsoft Corp. (NASDAQ: MSFT) that provides the world’s largest retailer with cloud solutions and services.
The common foe is Amazon.com Inc. (NASDAQ: AMZN), which gets about half of all U.S. e-commerce sales and has a first-mover position in cloud services with its Amazon Web Services (AWS) offering. The first is a threat to Walmart’s growth and the second is a threat to Microsoft’s.
In fact, Microsoft CEO Satya Nadella called the two companies’ battle with Amazon “absolutely core” to the just-signed deal. In an interview reported by The Wall Street Journal, Nadella elaborated: “How do we get more leverage as two organizations that have depth and breadth and investment to be able to outrun our respective competition?”
Walmart already uses Microsoft technology, and the new deal extends Walmart’s ties to include Microsoft Azure and 365 products. The retailer sees Azure as a continuation of its use of cloud computing and expects to move “hundreds of existing applications to cloud-native architectures.”
By scaling up its cloud integration, Walmart says it will build a global internet of things (IoT) platform on Azure to reduce energy use in thousands of U.S. stores. The expansion also will enable Walmart to apply machine learning to routing trucks in its supply chain.
The primary emphasis in today’s announcement is on cutting costs and making Walmart more productive. One thing not included in the Microsoft deal is a cashierless store similar to the Amazon Go store being tested now.
Walmart is testing customer acceptance of an app that allows them to scan and pay for items without going through a checkout line. Walmart previously tested other variations of cashierless checkout, but neither was a raging success.
Cashierless technology is also expensive and unproven. While it might work in an Amazon Go store of around 2,000 square feet, it hasn’t yet, and scaling such a system up to a Walmart supercenter-sized store would be massively expensive.
That’s not to say that a cashierless system may not be in the back of Walmart executives’ minds, but if Microsoft and Walmart do a deal to bring cashierless checkout to the world’s largest retailer, that will come later and build on the achievements of the next five years.
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