Microsoft (MSFT - Free Report) and Royal Dutch Shell PLC (RDS.A - Free Report) recently expanded strategic collaboration in a bid to accelerate digital processes. Microsoft’s robust cloud platform Azure and artificial intelligence (AI) capabilities will assist Shell to realize its digital transformation goals.
Per the agreement, Shell will utilize C3 IoT’s AI platform which will run on Azure. In this regard, the oil and gas behemoth is reportedly leveraging automated AI capabilities of Bonsai which Microsoft acquired in June, this year.
Further, Shell will adopt the company’s Office 365 communication apps, Microsoft Stream, SharePoint Online, and Yammer, with a view to improve its employee management processes.
Notably, Microsoft’s vision of making AI simple to use, eventually up-scaling its benefits to day-to-day aspects of life is enabling partners to digitize their respective processes.
In the words of executive vice president of Microsoft's Worldwide Commercial Business, Judson Althoff, “We are excited to deepen our relationship with Shell as the company continues to be a digital pacesetter for the industry."
We believe the company’s push into AI and other emerging tech spaces will help it to compete against fellow industry giants such as Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) , among others.
Ramping Up AI Use: A Key Catalyst
Microsoft’s extended relationship with Shell bodes well for both the parties. Shell intends to strengthen its predictive maintenance offerings with the expanded partnership.
Notably, the existing collaboration with Microsoft has enabled Shell to design Shell Geodesic. The solution simplifies drilling processes enabling geologists to take real-time decisions as required.
Additionally, Shell has deployed a deep learning solution on Microsoft Azure to address any untoward incidences. The solution utilizes closed-circuit camera video recording and Internet of Things (IoT) technology to detect safety violations, if any, automatically alarming retail site customers and employees in real time.
What the Investors Need to Know?
Shares of Microsoft have returned 34.5% year to date, substantially outperforming the industry’s rally of 26.9%. The stock has also fared better than the S&P 500 index’s rise of 10.3%.
This outperformance can primarily be attributed to its rapidly expanding efforts in AI and IoT based developments. Undisturbed focus on Azure remains a key catalyst.
Notably, per latest Synergy Research Group article, spending on cloud infrastructure services in the second quarter fiscal 2018 witnessed a year-over-year increase of 50%. Per the study, Microsoft’s cloud services only trail Amazon Web Services (“AWS”).
Moreover, per a report by MarketsandMarkets, the AI market is anticipated to hit $190.61 billion by 2025 at a CAGR of approximately 36.6% from $16.06 billion valued in 2017. The report reinforces Microsoft’s intention to tap into the immense potential of AI.
Microsoft is putting its best foot forward to gain a competitive edge in the AI market at different levels, from strengthening automated systems to virtual assistants to enhancing asset optimization processes and simplifying them for customers and partners.
The company’s focus on strengthening presence in the AI market is also evident from its acquisitions of Lobe, Bonsai, Semantic Machines, Maluuba, SwiftKet, to mention a few. These AI-based startups are expected to increase the prospects for the tech giant, going forward.
Microsoft carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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