Seems like Flipkart and Microsoft strongly believe in the proverb:, “Enemy of my enemy is my friend”. Here the common enemy seems to be global e-commerce and internet giant Amazon that is fast disrupting the two companies’ businesses.
While Flipkart competes with Amazon in the Indian e-commerce business, global IT giant Microsoft seems to be losing out in the Indian Cloud market to the Seattle-based company’s subsidiary, Amazon Web Services (AWS).
The steep competition that both Flipkart and Microsoft are facing from Amazon has led to the two entering into a strategic tie-up, wherein the Bengaluru-based company will use Microsoft Azure as its exclusive Cloud platform to start with. The collaboration also results in Microsoft bagging a large enterprise that could instantly boost its revenues from the Indian market.
However, IT and Cloud analysts are of the view that the partnership will have little impact on AWS and Amazon.in, which have already garnered a very substantial share in the Indian Cloud and e-commerce market in the past five years. AWS entered the Indian market in 2003, while Microsoft has been here for two decades.
Jayanth Kolla, founder and Partner at digital research and advisory platform Convergence Catalyst, told BusinessLine that the war is not so much between Amazon and Flipkart, but Microsoft and AWS, which has been fairly growing its market-share not only globally but also in India — a market that is expected to have reached $1.26 billion in 2016 and is growing at 30 per cent.
AWS, which is Amazon’s most profitable division, has been able to grow its market-share by tapping businesses from start-ups to SMEs to large corporates, while Microsoft has so far focussed only on big firms.
“AWS is still the market leader, volume wise, and that is because of its aggression. Microsoft has lacked over the years despite it being the first company to enter the Cloud service market,” Kolla said.
Pareekh Jain, Research Vice President - Engineering Services, HfS Research, said: “It doesn’t really impact AWS in the short term. It is one good reference customer for Microsoft. In the medium term, it can be good for Microsoft, as some of the sellers in the Flipkart ecosystem might move to Azure, going forward.”
E-commerceFrom the e-commerce point of view, where Amazon has been able to beat the decade-old Flipkart in terms of revenues, traffic and market-share in just five years, Jain said the tie-up will help Flipkart become more agile, improve on data analytics, support more users and give better-personalised experience to its users.
“Besides, it can do all this in a scalable way without worrying about capex. It is, in a way, future-proofing its operations and preparing its self for sustainable growth. Flipkart can better compete with Amazon in online shopping with this deal,” Jain said.
Kolla said the tie-up will help Flipkart in faster marketing of it products and outsourcingits data centre resources to Microsoft.
AWS in a statement has said it has over 75,000 active customers in India, including two large consumer-facing companies — Ola Cabs and Tata Motors. Meanwhile, Microsoft in a blog has said that it has about 50 Azure services locally.
Flipkart, heavily backed by global VC fund Tiger Global, is currently going through a tough time following a series of markdown valuations, mounting losses, high-profile exits (mostly in the tech team) and inability to raise further funds.
While it has raised about $3 billion in the past 10 years, Jeff Bezos, founder of Amazon, has committed about $5 billion to claim a dominant position in the ever-growing Indian e-commerce sector.