E-commerce News and Insights
May 21, 2020

FedEx and Microsoft Combine Forces to Challenge Amazon—What This Could Mean For Small Businesses

Shippo Snippets: 

  • FedEx and Microsoft will build off of each other’s strengths in order to take on the superpowers of Amazon 
  • Small businesses may benefit from FedEx/Microsoft’s technology when shipping, including real-time knowledge of conditions and delays 
  • The new technology will not cost customers extra and will provide a welcome relief to the overworked cloud-based infrastructure that is currently suffering during the COVID-19 crisis 
  • The question remains: should Amazon be concerned?

The Story:

Not just any David can go up against Goliath, especially during a pandemic as we cling to any kind of normal. Yet the crisis is bringing about all kinds of evolution and partnerships: hand the slingshot to FedEx and Microsoft

The two companies are officially combining their considerable forces to compete with eternal rival (and Death Star) Amazon. The goal is to co-develop new products and services through a multiyear technology and logistics partnership. In other words, to transform the way we currently perceive e-commerce. 

What’s in it for FedEx: FedEx is already well known for using technology to track packages. It’s adding Microsoft as a friend with benefits, taking advantage of its super technology know-how so that both companies can go to 5.0.  FedEx is the package scanning-and-tracking pioneer (it developed the business over forty years ago). Now, with Amazon literally on its tail, it wants to attract commercial customers by providing the tools that can’t be developed by small businesses themselves.  Microsoft can help FedEx do that. 

“Together with Microsoft, we will combine the immense power of technology with the vast scale of our infrastructure to help revolutionize commerce and create a network for what’s next for our customers,” said FedEx CEO Fred Smith in a press release

What’s in it for Microsoft: The collaboration can help take some wind out of Amazon’s considerable sails (more specifically, the cloud-infrastructure market). The company has also been partnering with other large companies to use its cloud and artificial intelligence software to help better automate, track, and digitize the needs of small businesses. In a video call with Smith, Microsoft CEO Satya Nadella said the FedEx partnership will “reimagine what commerce can look like.”

This fusion may come as no surprise to Amazon, which has been aggressively building its own delivery and logistics infrastructure. In 2019, FedEx ended its ground and shipping contracts with Amazon. Amazon still gives FedEx plenty of business, but nobody knows for how much longer as Amazon ramps up its own plan. 

FedEx/Microsoft projects will include the launching of cloud-based inventory and supply-chain management solutions. The partnership will pay special attention to Microsoft Azure, the second-most-used public cloud platform after Amazon Web Services. Microsoft Dynamics 365 will also be called into combat—this platform is meant to go up against Salesforce and other business software platforms.

The first service to result from the partnership, due this summer, will be called FedEx Surround. It will allow businesses to track the movement and location of packages in real-time, right down to the ZIP code. The system will use the data collected from FedEx scanners and loT devices. Included in the strategy will be data analysis from Microsoft’s AI, machine learning, and business intelligence technologies. Smith said in his conference call that Surround will make the inventory and sales processes “more focused and discrete.” 

Increased Competition Could Be a Benefit for Small Business

The full nature of the FedEx/Microsoft partnership was not disclosed, including how much FedEx will pay Microsoft for use of its Azure cloud technology. However, the very act of partnering up is a sign that the cloud computing market is getting even more competitive. It’s no longer only Amazon’s game. This could translate to more competitive prices for small businesses.

CNBC reports predict that, eventually, Amazon may be shipping everything without the help of third parties. For now, it maintains exclusive customers, including Brooks Brothers and Under Armour, as well as healthcare companies like Bristol-Myers Squibb and Celgene. 

Better Together

Of course, the timing is nearly perfect. One of the most important ways for a small business to stay open right now is by being able to rely upon an efficient, state-of-the-art supply chain. Yet, there are challenges in the current state. In fact, the PYMNTS COVID-19 tracker shows that the sheer volume of packages from a variety of retailers has forced FedEx to limit its deliveries. UPS suspended its service guarantees on March 26, 2020. The FedEx Surround solution could take some of the pressure off of the existing services. And, it will allow any business to get a clearer glimpse into the supply chain with the help of real-time ship-tracking analytics.

Besides better visibility of a package’s location throughout the shipping journey, FedEx Surround benefits could also include:

  • Real-time knowledge of global commerce conditions
  • External challenges that may occur, including: 
  • Severe weather
  • Natural disasters
  • Mechanical delays 
  • Clearance issues 
  • Incorrect addresses 

This type of insight could allow small business owners to intervene and avoid logistical slowdowns before they occur. 

Bloomberg reports that FedEx Surround will not cost customers anything extra and will begin with a pilot program. The platform will be a mix of Microsoft Azure cloud services and artificial intelligence tools, and software that uses data from FedEx scanners and sensors. 

This merger has not gone unnoticed, as shipping competition heats up. Amazon is continuing to develop new delivery capabilities, as is Walmart. But the question remains, should Amazon be concerned? Let’s see how things unfold. 


Explore Shippo for efficient and cost-effective shipping and logistics solutions. 


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Ron Sklar
is a business content writer based in New York. He writes for clients in a number of sectors, including real estate, healthcare, financial services, tech, and transportation/automotive.

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