You only need to look at Microsoft’s share price – up more than three-fold in the last five years, and 32 per cent since the start of the year – to see how the broad shift of business to the cloud is driving the US tech giant’s growth.
Retailers value data
But in some sectors, and particularly retail, Microsoft is gaining an extra advantage of its most prominent competitor simply because it isn’t Amazon.
Amazon Web Services might be a bit bigger than Microsoft’s Azure cloud business, but retailers are understandably cautious about working with a business that is a supplier on one hand, and a ruthless competitor on the other.
Of course, this is particularly the case in the US, where Amazon’s Prime offering and its ownership of Whole Foods means it is an even more direct competitor to the likes of Walmart and Kroger.
Indeed, Walmart’s desire to put space between itself and Amazon is so great that in the middle of 2017 it started to tell technology suppliers they should move away from AWS if they wanted to keep working with Walmart.
Shelley Bransten, corporate vice president of world wide retail and consumer goods for Microsoft, tells Chanticleer that increasingly retailers of all shapes and sizes are placing high value on their data, given it is so central to the changes sweeping through customer personalisation, loyalty, supply chain and planning.
On the retail battleground, Microsoft has become something of a digital Switzerland.
“They’re looking for a partner that’s going to be a true partner. and not a competitor,” Bransten says.
Coles’ tech investments
Coles’ chief information and digital officer Roger Sniezek, said Microsoft’s competitive position relative to Amazon was a consideration, but the bigger driver of the deal was Microsoft’s preparedness to approach the deal as a true partnership and invest accordingly, to the extent that Microsoft engineers will be sitting side by side with those from Coles, writing code.
It is why Bransten says the Coles agreement represents a “huge moment in Australia” for Microsoft.
“This represents a whole new chapter in what it means to be a tech provider,” she says.
“Increasingly where IT roadmaps are less clear, customers are coming less saying ‘I want to buy this product from you’ and increasingly saying, ‘how do I think about my digital transformation?’”
This is particularly important for Coles, which has announced a string of tech investments in the last few months, including its deal in March with British group Ocado to deliver a new online grocery platform, and deals with Optus for a high-speed network, and with SAP for back-end systems.
The supermarket group is also ploughing about $1 billion into two new automated distribution centres, to be built by German group Witron.
Sniezek says most of these projects are well underway. But Microsoft’s provision of direct support will ensure Coles can accelerate its transformation.
Future of AI
Bransten emphasises that while Microsoft now has a string of retail tech deals, intellectual property developed by one retailer will always be controlled by that business.
Where there could be sharing is around what Bransten describes as “pattern recognition” in areas such as staff productivity, personalisation around loyalty programs and transparency of supply chains.
Sniezek also points out that discussion and sharing of ideas between Coles and international retailers is going on already.
Asked for an example of the type of problem he’d eventually solve, Sniezek nominates availability; that is, having products on the shelf at the right times, and not out of stock.
Sniezek sees a world where AI is not only used for forecasting availability, but can also take in past and future weather patterns, local events in various communities and seasonal things such as school holidays. This would, of course, feed everything from procurement and logistics, through to labour planning and, potentially, what offers go to customers.
“That is absolutely ripe for an AI approach.”