Amazon’s $1 billion cloud deal with Microsoft includes 550,000 licenses for corporate employees and 1 million for warehouse workers

• Amazon has committed $1 billion over 5 years to use M365, an internal Microsoft document states.
• The arrangement includes more than 1.5 million seats across tiers, a person familiar with deal said.
• Amazon is expected to start setting up this month, the person added.

According to a person with direct knowledge of the deal, 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 an internal Microsoft document seen by Insider and two people familiar with the matter, the agreement calls for Amazon to spend more than $1 billion over five years.

According to one of the people, Amazon already uses an on-premise version of Microsoft’s Office products but is transitioning to the cloud-based version of these productivity tools.

According to the person, the agreement includes approximately 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. These individuals requested anonymity because they were discussing private matters.

According to the company’s most recent annual report, Amazon had approximately 1,541,000 employees at the end of 2022. According to one of the people, the e-commerce giant is expected to begin setting up on M365 this month, with the full transition for Amazon employees taking place in early 2024.

Reset Relationship

The move marks a significant shift in Amazon and Microsoft’s relationship. The two companies are bitter rivals in their battle for dominance in the cloud computing market. Amazon is now a significant cloud customer of Microsoft.

According to a person familiar with Amazon’s operations, the company avoided the cloud version of Microsoft’s 365 products because it did not want to save anything on a competitor’s cloud.

E5 as opposed to F5

E5 is the most expensive version of M365, and it includes all of Microsoft’s standard cloud-based apps, such as Outlook for email, Word, PowerPoint, SharePoint for file sharing, and the Microsoft Teams chat app. There are also advanced security and compliance features, as well as audioconferencing for up to 1,000 attendees.

F5 is a more advanced version of Microsoft’s M365 product for front-line employees. This version includes many of the same features as E5, but at a lower cost for staff, which Microsoft defines as “any individual—regardless of education or industry—who works directly with customers, clients, or other recipients of services.”

Comparison of sticker price and reality

M365 E5 is advertised by Microsoft for $57 per user per month with an annual commitment. Few corporate customers pay that price, and businesses frequently negotiate discounted long-term contracts. However, if all 550,000 licenses were active for the entire five-year period, that official figure would imply spending $1.9 billion over five years.

M365 F5 starts at $8 per user per month, for a total of $480 million over 5 years for all 1 million licenses. F5 is an add-on to either F1 or F3, which start at $2.25 and $8 per user per month, respectively, or an additional $135 million or $480 million.

Given the volume of licenses and the length of the commitment, Amazon is unlikely to pay the official sticker price for these cloud services. However, given the size of the company’s workforce, this will still be a massive deal.

An Amazon spokesperson stated that adding up these M365 sticker prices “grossly overestimates the value of the deal,” but declined to comment on Microsoft’s internal document’s $1 billion spending commitment. Microsoft did not respond.