Microsoft’s Deal With GE Shows the Cloud Isn't All Just About Amazon
Bloomberg News
When it comes to cloud infrastructure (IaaS) services, Amazon (AMZN) - Get Report, Microsoft (MSFT) - Get Report, IBM (IBM) - Get Report and Alphabet's (GOOG) - Get Report Google are increasingly in a league of their own.
Various smaller providers can still carve out niches, but the scale, feature sets and geographic reach of the giants mean enterprises and cloud service providers with major infrastructure needs have good motivation to partner with one or more of the giants, rather than team with a smaller firm or take a go-it-alone approach.
Cloud CRM software leader Salesforce.com's (CRM) - Get Report recent deal with Amazon -- reportedly worth $400 million over four years -- to have Amazon host much of its overseas infrastructure is a good example of this trend, as is Cisco's (CSCO) - Get Report recent cloud Internet of Things (IoT) service partnership with IBM.
General Electric's deal with Microsoft to have GE's popular Predix industrial IoT cloud app development platform (PaaS) run on Microsoft's Azure cloud platform, announced today, is the latest example of a notable cloud service provider working with one of the giants. Predix already runs on Amazon Web Services (AWS), as well as on GE's own infrastructure.
The alliance comes amid an explosion in the number of IoT devices companies are managing and collecting data from, and highlights two of Microsoft's biggest selling points for Azure as it does battle with the likes of Amazon and Google. The first is its strong support for hybrid cloud environments in which some workloads reside within an enterprise's own IT infrastructure (with the ability to move them to a public cloud on the fly), and the second is Microsoft's ability to integrate Azure services with many of its popular on-premise and cloud-based software products.
The companies claim the deal will give Predix clients access to both Azure's large public-cloud footprint and "hybrid capabilities," among other things. They also promise to integrate Predix with cloud-based Microsoft business apps, such as the Office 365 suite, Dynamics 365 ERP and CRM apps, and Microsoft's Power BI business intelligence/analytics solution. They also plan to integrate it with the Azure IoT Suite, which provides cloud-based IoT back-end services, and the Cortana Intelligence Suite, which includes Power BI, Cortana's assistant service and several other tools for gleaning insights from massive datasets, such as those produced by IoT devices.
Jim Cramer, TheStreet's founder and manager of the Action Alerts PLUS portfolio, which owns GE, is upbeat about Predix's potential to lower maintenance costs for industrial hardware and thinks Microsoft's deal highlights the platform's strategic importance to GE.
"One of the reasons why we love GE for Action Alerts is that we believe in Predix, which is the way to be able to have a digital economy that's industrial," Cramer said. "What [Predix] does is say, 'Hey listen, you don't have to have a repairman out right now,' or 'You need a repairman tomorrow because it's going to break.' Think about the amount of money that can be saved if you were always aware that something you have was about to break."
Cramer added, "I think this is GE once again saying, 'This is not just for show. Predix is real.'"
As a recent Forbes article on Microsoft and Google's efforts to challenge Amazon observed, Microsoft has an early lead on Amazon (and arguably also on Google) in providing advanced IoT services. Meanwhile, with industrial IoT devices often located in places where Internet connectivity can be slow or unreliable -- think oil rigs, wind turbines or cargo ships -- it often makes a lot of sense to go with a hybrid cloud approach in which processing is done close to the devices. The value of this approach, also adopted by IBM and Cisco, arguably makes Microsoft a better IoT partner for GE than Amazon or Google, whose services tend to be delivered solely by their public clouds.
The fact that GE, which is hoping to produce $15 billion/year in software revenue by 2020, chose to team with Microsoft is particularly noteworthy in light of the fact GE is in the midst of migrating the lion's share of its internal enterprise workloads to AWS. In spite of its ties with Amazon, GE apparentlythought Azure's feature set made it worth supporting.
Amazon, of course, has its own strengths, such as the public-cloud market's most extensive feature set and a huge third-party software ecosystem, not to mention the brand power that comes with being the market's 800-pound gorilla. And Google, leveraging the big investments it has made in its web services infrastructure, has carved out a reputation for providing superior performance and lower costs for many services, as well as for releasing developer-friendly tools for adopting those services.
But as the GE deal shows, Microsoft's strengths also can't be dismissed -- particularly when it comes to battling for enterprise deals for which hybrid cloud support and/or integration with Microsoft software can act as useful differentiators.
GE, Alphabet and Cisco are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells GE, GOOG or CSCO? Learn more now.