At first glance, Walmart’s announcement today that it has signed a five-year agreement with Microsoft seems like it’s just a major step towards boosting its lagging online growth. But it’s really a battle cry against a mutual foe: Amazon (amzn).
The agreement gives Walmart (wmt) access to Microsoft’s 365 and Azure cloud computing systems across all its lines of business, migrating some of its apps and websites to Azure. The retail giant plans to build out a worldwide Internet of Things platform with Microsoft (msft), connecting its stores and shipping systems to streamline its supply chain. But it’s also likely to break down sales-data silos to better recommend products.
“Walmart’s commitment to technology is centered around creating incredibly convenient ways for customers to shop and empowering associates to do their best work,” Walmart CEO Doug McMillon said in the announcement. “Whether it’s combined with our agile cloud platform or leveraging machine learning and artificial intelligence to work smarter, we believe Microsoft will be a strong partner in driving our ability to innovate even further and faster.”
In an interview with the Wall Street Journal, Microsoft CEO Satya Nadella said the companies’ shared rivalry with Amazon “is absolutely core to this.” While Walmart is interested in cashierless checkout systems, it is pursuing its own solutions rather than using Microsoft’s technology.
Walmart has been using Microsoft’s Azure since its $3 billion acquisition of Jet.com, which was built on the technology, in 2016. Walmart is already fighting Amazon in India, where the Bentonville retailer announced it was acquiring domestic e-commerce success story Flipkart for $16 billion in May. In its battle against Amazon, Walmart has also collaborated with Google to sell its products. But Flipkart has opposed any involvement by Google parent Alphabet in its business.