Is AWS Forming a “Rebel Alliance” to Take on Microsoft?

Amazon Web Services (AWS) has reportedly discussed forming an alliance with Dropbox, Slack, Smartsheet, and others to create a bundle of cloud solutions (i.e., AWS cloud platform bundled with the business apps offered by the others).  The goal would be to create a collective solution that would directly compete with Microsoft’s offerings.  Without this alliance, AWS and these other companies could not take on Microsoft on their own, and each are aware of this.

According to reports by Business Insider, AWS and the others would take this bundled solution to market at a single price point and would include features like a single sign on portal and unified billing through AWS.  The alliance’s go-to-market strategy would be targeted at companies that may prefer integrating a set of business apps along with AWS — companies that have been looking for the ability to implement a true best-of-breed approach in this space.  This contrasts with integrating apps from a single vendor like Microsoft.

As far as anybody can tell, this Rebel Alliance, which got its name from the Star Wars canon, is still at the idea stage with no final approval from new Amazon CEO Andy Jassy and nothing eminent to be rolled out.  At the time this was being discussed, Jassy was CEO of AWS.

However, when there is smoke there is usually fire, and truthfully, it all makes way too much sense to not be true.  Given this, I started to wonder what this alliance could mean for the future of the cloud market.  To forecast the possibilities, we must look at the history between AWS and Microsoft and understand what the “Rebel Alliance” entails.

AWS vs. Microsoft in the Cloud Market

Everyone knows that AWS is a dominant player in the cloud platform world, specifically infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS), competing directly against Microsoft Azure and Google Cloud Platform (GCP) to obtain valuable market share and lucrative cloud deals.  In fact, Amazon’s recent Q2 earnings report showed that AWS’s quarter revenue totaled $14.81B and saw a 37% increase year-over-year in its cloud computing business.  However, unlike Microsoft, AWS has not established itself in the software-as-a-service (SaaS) space but does seem to have the goal of moving into the SaaS market.

AWS and Microsoft Azure have a long and storied history competing against each other, often very aggressively to grab as much market share as they possibly can and as fast as they can.  Most notably, there is the JEDI contract, a $10B cloud hosting contract that was recently awarded to Microsoft by the U.S. Department of Defense but was since canceled due to outside pressures and legal action by AWS.  At this point in time, it has been opened back up for bid, and it seems that the end result will be the Department of Defense going with a multi-vendor approach, meaning AWS and Microsoft must split the pie with each other and possibly GCP and/or Oracle if they have anything to say about it.

While AWS holds its own as a competitor against Microsoft and Microsoft’s Azure solution, Microsoft does have a leg up on AWS due to the expansive array of products that they can pitch and sell to their long-standing customer base.  From their Dynamics ERP and CRM solutions (Dynamics 365), Office productivity apps (O365, M365 and all the various flavors), LinkedIn, Power Platform (Power BI, Power Apps, Power Automate) and more (including devices), Microsoft has several revenue streams they can establish with their customers and can integrate this vast array of products as “one solution.” This gives them more influence over those enterprises.

The Rebel Alliance

The Rebel Alliance is AWS’s response to Microsoft’s continued growth and dominance among their vast enterprise customer base.  Microsoft can already bundle their cloud and productivity solutions for their customers – these enterprises likely have many Microsoft products implemented as well as more on the horizon as part of a larger Microsoft roadmap.  Microsoft pitches the benefits that come with having one vendor providing a set of solutions that can be “bundled” together through integration-established points and synergies.  This pitch very often lands well with customers.

Microsoft is also pushing industry solutions onto the manufacturing, retail, financial services, healthcare and non-profit industries. These solutions are a bundle of core Microsoft offerings (Azure, Microsoft 365, Power Platform, Dynamics 365, etc.) and tailored add-ons designed to motivate (sell) the use of the entire Microsoft stack – the portfolio of products — and make it more difficult for customers to move away from any piece of the portfolio down the road.

In fact, with these industry-specific solutions, organizations are actually required to have portions of the Microsoft stack to unlock the value, like Teams, Dynamics 365, Azure and other Microsoft products, that effectively (in one swoop)  tether you to their portfolio.  Both Satya and CFO, Amy Hood, made it abundantly clear during their recent FY21 Q4 earnings call that getting customers to adopt as much of the Microsoft stack and creating reliance on the Microsoft Cloud is critical to continued success for Microsoft and their shareholders.

Microsoft’s customer penetration and ability to sell a complete set of products as a holistic and valuable solution has led AWS to (at least supposedly) try and form partnerships with prominent cloud software and business application companies like Slack, Dropbox, and Smartsheet to create a viable bundled alternative to Microsoft’s set of offerings.  These companies come with their own influence and presence within targeted Microsoft customers as well:

• Dropbox: A file hosting service offering cloud storage, file synchronization, personal cloud, and client software with over 600 million users across 180 countries.
  • Revenue: $1.9B (FY 2020)
  • Notable Customers: National Geographic, Sundance Institute, Brandt
• Smartsheet: A cloud-based platform that allows organizations to plan, capture, manage, automate, and report on work across their business.  Smartsheet’s customers make up 75% of the Fortune 500.
  • Revenue: $270.9M (FY 2020)
  • Notable Customers: Procter & Gamble, Pfizer, Apple
• Slack: A B2B communication software providing the leading channel-based messaging platform. Slack was recently acquired by Salesforce, making them a potential player in this alliance.
  • Revenue: $902.6M (FY 2021)
  • Notable Customers: IBM, Target, HubSpot

Each of these companies involved in the potential Rebel Alliance have been and will be competing against Microsoft in their own way.  An alliance would benefit each company because they can use the resources at AWS’s disposal as well as AWS’s established relationships (AWS has significant market share) to get access to decisionmakers at the customers where they have been trying to penetrate.  This would help these companies become a more legitimate competitor to Microsoft.

The Rebel Alliance could also very much help AWS establish its goal of expanding into the SaaS market while also maintaining prominence as a direct competitor against Microsoft in the cloud platform battlefield.  If the trigger is pulled on the alliance, expect these companies to knock on the doors of their customers as a unified front to push the value tied to taking a more best-of-breed approach while still getting integration assurances that come with joining the Rebel Alliance against the Evil Empire (not that I think of Microsoft as an Evil Empire but I had to do it…I waited this long).

What Could This Mean for the Future?

AWS is undeniably the “big dog” in the Rebel Alliance as an extension of the Amazon conglomerate.  They have the money, the capability, and the resources to acquire companies that could help them deliver everything to the customers they are pitching, including becoming an enterprise cloud application vendor.  Who is to say that, if the Rebel Alliance comes to fruition and succeeds, Amazon (or AWS) will not buy Dropbox, and/or Smartsheet?  Is it that hard to imagine?

Further, the recent acquisition of Slack by Salesforce points to the possibility of Salesforce becoming a member of this alliance as well (wouldn’t that be interesting?).  Salesforce is a significant competitor against Microsoft in its own right as they go head-to-head for CRM market share (Salesforce Sales Cloud vs. Microsoft Dynamics 365).  And that was before Salesforce acquired Tableau in 2019, a company providing business analytics software that competes directly against Microsoft’s Power BI.

By acquiring Tableau and now Slack, which competes with Teams, Salesforce has an interest in competing with Microsoft and, thus could have an interest in becoming a player in the Rebel Alliance.  If Salesforce were to join the alliance, that would bring some really big guns to the gun fight.  Salesforce has successfully grown their set of products and grabbed significant market share as well as a significant amount of loyal customers along the way.  If Salesforce were to be a part of this alliance, it could get really interesting, really fast.  Also, AWS could even one day decide to also acquire Salesforce and make it a clean sweep.  Although, with each passing day, that price tag becomes steeper and steeper.

This future establishment of a true Rebel Alliance that could include Salesforce becomes even more probable when you consider Adam Selipsky, the former CEO of Tableau who stayed at Salesforce after the acquisition, recently became the CEO of AWS after Jassy moved into the Bezo’s CEO role.  This gives Jassy the ability to pull the trigger on the Rebel Alliance from the Amazon seat with the support of his new AWS CEO.

Additionally, Slack and Amazon have partnered together before – Amazon’s employees use Slack’s communication platform while Slack adopted AWS’s cloud solutions.  Slack, Salesforce, and AWS have deep rooted connections that could help them get easily aligned on the goal of offering a best-of-breed package to enterprises and, maybe eventually, an enterprise application company led by AWS.

On Microsoft’s side, with the possibility of a Rebel Alliance out in the open, Microsoft will ramp up their efforts to win and add more products to their customers’ portfolios to get ahead of AWS.  Truth be told, they would be doing this anyway, and I am not sure Microsoft will ever really feel threatened.  If there is any question about where Microsoft is focused, all you have to do is listen to the recent earnings call (or my recent podcast), and it is abundantly clear that a “win” for Microsoft is no longer selling a single product – it is about selling all of their products to a customer.

Microsoft knows that by getting more products into their customers’ ecosystem, it will be harder for those customers to move away from Microsoft and even entertain the Rebel Alliance’s offering, even if it is a compelling offering.  Microsoft customers should expect an even more aggressive push by Microsoft’s sales team to expand and extend your portfolio and commitment to Microsoft’s stack.  The good news is that, if done correctly, customers have a chance to use this aggressive push against Microsoft as leverage to optimize the long-standing relationship that has been in place and achieve best-in-class outcomes when negotiating with Microsoft.

The Bottom Line

Nothing has been set in motion yet regarding the Rebel Alliance, and for all we know this will prove to be nothing more than smoke if nothing comes out of these reported discussions.  However, your organization should pay attention to this.  This could be a massive development in the cloud market and could lead to a shake up in the competitive landscape by providing a solution to consider instead of Microsoft.  It also creates leverage you may have never had before and may never have again.

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