September 16, 2020
San Francisco-based startup Abnormal Security is moving its AI-driven email security software to Microsoft’s Azure Marketplace, in exchange for Microsoft’s promise to sell Abnormal’s services to its enterprise clients. This is the first such deal for Microsoft, which is battling Amazon for cloud computing dominance. Amazon has already inked similar deals; in a January agreement, cloud-cost management software company Apptio expanded its use of Amazon Web Services in exchange for Amazon’s help to sell Apptio’s services to its clients.
The Wall Street Journal reports that, “for the two cloud-computing giants those partnership deals could help sustain growth in a business segment that has become crucial to their financial fortunes — and increasingly competitive.” “All these cloud platforms would love startups to build on top of them,” said Madrona Venture Group managing director Matt McIlwain. “What’s new is this intentionality and saying, ‘We’re going to partner’.”
According to Gartner, “Amazon has a 45 percent market share in providing the so-called public cloud infrastructure, ahead of Microsoft with almost 18 percent.”
Abnormal has used AWS for years and, although moving a service from one cloud provider to another can be “cumbersome and costly,” that company’s chief executive Evan Reiser said that “selling its security service to the huge enterprise customers with ties to Microsoft was so attractive it outweighed the downside of making the switch.” With the shift to remote work, “Microsoft’s stock has risen more than 30 percent this year … [and] Amazon’s stock is up more than 70 percent, driven by the strength of its cloud and online retail sales.”
WSJ notes that the two behemoths have been “battling fiercely, including over multibillion-dollar government contracts.” Microsoft recently won a “potentially $10 billion cloud computing contract” with the Pentagon.
Amazon, however, has had a “jump on winning business from startups,” many of which were early adopters of cloud services. The company debuted AWS Connections, “a program designed to link startups with some of its biggest customers … [and] since 2019 … arranged around 2,000 meetings between startups and potential customers.”
Digital insurance startup Slice Insurance Technologies was one beneficiary, winning business from an Australian health insurance provider. “If you’re a startup, having a big brother doesn’t hurt,” said Slice chief executive Tim Attia, referring to the Amazon program.
Microsoft’s challenge in attracting startups is that they can “be leery of the tech giant whose business software can include competing products.” Jeff Ma, hired by Microsoft to woo startups, “approached venture-capital firms Greylock Partners, Benchmark and Andreessen Horowitz to try to snare business among their portfolio companies.” Abnormal board member/Greylock Partners general partner Saam Motamedi noted that, “Microsoft is spending a lot of resources on this.”