Amazon’s multiyear commitment to use Microsoft 365 includes more than 1.5 million license seats across different tiers of Microsoft’s cloud-based productivity suite, according to a person with direct knowledge of the deal.
The arrangement involves Amazon spending more than $1 billion over five years, according to an internal Microsoft document viewed by Insider and two people familiar with the matter.
Amazon already uses an on-premise version of Microsoft’s Office products but is moving to the cloud-based version of these productivity tools, according to one of the people.
The pact includes around 550,000 seats of Microsoft’s M365 E5 product for corporate workers and 1 million seats of M365 F5 for frontline staff such as fulfillment center employees, the person said. These people asked not to be identified discussing private matters.
Amazon had roughly 1,541,000 employees at the end of 2022, according to its latest annual report. The e-commerce giant is expected to start setting up on M365 this month and the full move for Amazon employees is expected to happen in early 2024, one of the people said.
Relationship reset
The move represents a major reset of the relationship between Amazon and Microsoft. The two companies are bitter crosstown rivals and are fighting for dominance of the cloud computing market. Now, Amazon is becoming a major cloud customer of Microsoft.
A person familiar with Amazon’s operations said the company stayed off of the cloud version of Microsoft’s 365 products because they didn’t previously want to save anything on a competitor’s cloud.
E5 versus F5
E5 is the top-of-the-line version of M365 including all of Microsoft’s standard cloud-based apps such as Outlook for email, Word processor, PowerPoint, SharePoint for file sharing, and the Microsoft Teams chat app. There are additional features like advanced security and compliance and audioconferencing for up to 1,000 attendees.
F5 is an upgraded version of Microsoft’s M365 product for frontline workers. This offers many of the same features as E5, but at a lower price for staff Microsoft defines as “any individual—regardless of education or industry—who works directly with customers, clients, or other recipients of services.”
Sticker price versus reality
Microsoft advertises M365 E5 for $57 per user per month with an annual commitment. Few corporate customers pay that sticker price, and companies often negotiate discounted long-term contracts. However, that official number would mean spending $1.9 billion over 5 years if all 550,000 licenses were active during the whole period.
M365 F5 starts at $8 per user per month, which would be $480 million for all 1 million licenses over 5 years. F5 is an add-on to either F1 or F3, which start at $2.25 and $8 per user per month, or another $135 million or $480 million, respectively.
It’s highly unlikely that Amazon would pay the official sticker price for these cloud services given the volume of licenses and length of the commitment. But the size of the company’s workforce means this will still be a gargantuan deal.
An Amazon spokesperson said adding up these M365 sticker prices “grossly overestimates the value of the deal,” but declined to comment on the $1 billion spending commitment described in Microsoft’s internal document. Microsoft did not comment.
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