FedEx and software giant Microsoft have announced a new, multiyear strategic alliance that company leaders believe has the potential to transform commerce.

The collaboration, announced Monday, May 18, reflects a long-term commitment by the companies to work together to spark innovation, share subject matter expertise and create new products, starting with the rollout of FedEx Surround later this year.

It perhaps signals a new front in FedEx’s competition with e-commerce giant Amazon, by aligning FedEx with the biggest challenger to Amazon Web Services’ lead position in the cloud computing market.

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FedEx last year severed ties with Amazon by declining to renew agreements to carry Amazon packages by air and ground. Instead, it has pursued a strategy of helping Amazon’s competitors in the fast-growing e-commerce space.

The new collaboration will combine FedEx’s global digital and logistics network with Microsoft’s intelligent cloud computing architecture to develop multiple joint offerings of data and analytics solutions needed to successfully compete in digital commerce, the companies said. Microsoft’s Azure cloud computing service and Dynamics 365 applications will support the offerings.

“FedEx has been reimagining the supply chain since our first day of operation, and we are taking it to a new level with today’s announcement,” Frederick W. Smith, chairman and chief executive officer of Memphis-based FedEx, said in a news release.

“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,” Smith said.

Microsoft says its Microsoft Azure service is “trusted” by more than 95% of Fortune 500 companies, and FedEx networks connect more than 99% of the world’s gross domestic product across 220 countries and territories.

Company leaders said the alliance will result in new products giving businesses “an unprecedented level of control and insight into the global movement of goods.”

“Now more than ever, organizations are counting on an efficient and capable supply chain to remain competitive and open for business,” said Satya Nadella, chief executive officer of Redmond, Washington-based Microsoft.

“Together with FedEx, we will apply the power of Azure, Dynamics 365 and their AI capabilities to this urgent need, building new commerce experiences that transform logistics for our mutual customers around the world,” Nadella said.

The initial offering, FedEx Surround, will enable companies to digitize supply chains and exercise more precise control over logistics and inventory management. It will draw on multiple data points collected by FedEx to provide a near real-time window into shipment tracking, down to ZIP Code level.

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Officials said FedEx Surround would benefit any business with a supply chain, but particularly those dealing in highly time-sensitive deliveries, such as a life-saving delivery to a hospital or a part needed to avoid a factory shutdown. It’s billed as helping users prevent shipping delays before they occur.

FedEx Surround will have the ability to collect data generated by FedEx’s enhanced scanning and proprietary Internet of Things technology and then analyze the data using Microsoft’s artificial intelligence, machine learning and analytics solutions.

In addition to keeping a closer watch on a package in transit, a business could stay abreast of global commerce conditions and challenges such as severe weather, natural disasters, mechanical delays, clearance issues and wrong addresses.

“This unprecedented level of data-driven insight will give FedEx Surround customers the opportunity to intervene early and act to avoid logistical slowdowns before they occur to reduce friction and costs. And with every package that ships, FedEx Surround will analyze past trends to identify future opportunities for streamlined shipping, creating a stronger and more resilient commercial ecosystem,” the companies said.

FedEx chief Smith has long been a big believer in technology, famously declaring, “The information about the package is as important as the package itself.” 

Microsoft is a long-time vendor of FedEx and the largest software company in the world by sales volume, $118 billion in 2019. Its products serve more than 70% of the desktop and laptop market globally.

Amazon Web Services was the dominant cloud service provider at 32% in the fourth quarter of 2019, followed by Microsoft Azure, 18%, Google Cloud, 6%, and Alibaba Cloud, 5%, according to technology research firm Canalys.

As part of FedEx’s multiyear modernization of information technology systems, dubbed Project Renewal, FedEx chose Microsoft Azure as the basis of a cloud-native application to provide same-day service for retailers.

“With Microsoft, we found a vendor that’s compatible with our approach to multi-cloud and platform services and the protection of our data through intelligent security services,” FedEx executive vice president and chief information officer Rob Carter wrote in a 2017 article for Microsoft.

“Now, instead of installing software across the many thousands of places where we operate, we are taking a different approach. We chose Microsoft 365 so our more than 400,000 team members can take advantage of the cloud in ways that make us more collaborative and creative, driving a new era of innovation,” Carter wrote.

Information about the availability of FedEx Surround will be shared beginning this summer, and customer access will be rolled out in the months ahead.

FedEx and Microsoft anticipate announcing more solutions in coming months, using technologies including Dynamics 365. “This includes reimagining commerce experiences for businesses to offer consumers more integrated ways to shop, and faster and more efficient deliveries,” the companies said.

Major companies working closely with Microsoft and using the Microsoft Azure platform have included eBay, Boeing, Samsung, GE Healthcare, BMW and Travelocity, according to CSI Cyber Infrastructure.