Microsoft (MSFT - Free Report) and Volkswagen AG (VLKAY - Free Report) recently entered into a strategic alliance in a bid to enhance Volkswagen Automotive Cloud. Microsoft Azure’s robust cloud, Internet of Things (IoT) and Edge capabilities will enable the automaker to offer mobility services.
As part of the deal, PowerBI (Microsoft’s business analytics service), Skype and IoT Edge, will aid Volkswagen in enhancing in-car consumer experience, strong telematics monitoring systems and other productivity solutions.
With the partnership, Volkswagen aims to expand the use of this enhanced Automotive Cloud to its comprehensive brand portfolio. In this regard, Germany-based automaker will build a new automotive cloud development facility in Washington State in close proximity to the tech giant’s headquarters.
Volkswagen plans to deploy the new cloud platform to more than 5 million new electric cars from 2020, on an annual basis.
Notably, Microsoft’s vision of enhancing various sectors, from retail to energy, with robust methodologies is allowing partners to digitize their respective processes.
In the words of Satya Nadella, CEO of Microsoft, “The world’s leading companies run on Azure, and we are thrilled that Volkswagen has chosen Microsoft. Together we will reimagine the driving experience for people everywhere.”
We believe the company’s push into Azure cloud, artificial intelligence (AI) and other emerging technologies will aid it in competing against peers such as Amazon (AMZN - Free Report) , Alphabet’s Google Cloud, among others.
Microsoft’s Efforts in Enhancing Smart Vehicles
Microsoft is leaving no stone unturned to capitalize on the autonomous vehicle industry’s immense potential. In fact, it has collaborated with Mapbox Inc, a mapping startup in this regard.
Through partnerships and collaborations, the company is driving innovations to boost this initiative.
Per BI intelligence, 10 million self-driving cars will hit the roads by 2020. Statista states that the market for fully autonomous vehicles will grow to almost $6 billion, while partially autonomous vehicles market will reach $36 billion by 2025. Boston Consulting Group anticipates the autonomous car market to be worth $42 billion by 2025 and $77 billion by 2035.
Consequently, the estimates provided by these firms make us optimistic on Microsoft’s prospects in the space.
Azure: A Key Catalyst
In a recent report, Gartner stated that the public cloud services market is expected to grow from $153.5 billion in 2017 to $186.4 billion in 2018. Given the widespread adoption of cloud, Microsoft’s initiatives to tap this growing sector seem apt. This partnership with Volkswagen is also expected to provide the company with a competitive edge against cloud market leader Amazon Web Services (“AWS”).
The adoption of Microsoft’s Azure has been robust as evident from its strong customer base.Azure has already been selected by the likes of Walmart (WMT - Free Report) , Royal Dutch Shell PLC, to name a few. In fact, in the fourth quarter of fiscal 2018, Azure revenues soared 85% at constant currency (cc) on a year-over-year basis. Data center expansion continues with Azure now in 54 regions globally.
Notably, per latest Synergy Research Group article, spending on cloud infrastructure services in the second quarter of fiscal 2018 witnessed a year-over-year increase of 50%. Per the study, Microsoft’s cloud services revenues trail only AWS.
The new partnership adds to Microsoft’s growing clout, consequently driving its top-line growth.
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