Amazon And Salesforce Strengthen Global Strategic Alliance

Amazon.com, Inc.’s (NASDAQ:AMZN) Amazon Web Services (“AWS”) and Salesforce.com, Inc. (NYSE:CRM) have strengthened their global strategic alliance with five service integrations.

With these integrations, the Salesforce Platform will be connected to Amazon AppStream 2.0, Amazon Redshift, Alexa, AWS IoT, and Amazon Virtual Private Cloud (Amazon VPC) to offer customers better ways of managing their data.

Salesforce will now use AWS across all of its core products, namely, Sales Cloud, Service Cloud, Analytics Cloud, Community Cloud and more. Canada will be the first country to host this integration that is expected to be initiated by mid-2017.

The move appears to be a part of the broader infrastructure expansion plan that the duo had unveiled in May.

The Integrations in Detail

Amazon AppStream 2.0, which is a fully managed secure application streaming service, will be made available in the Salesforce AppExchange as a Lightning Component. This will allow quick and easy integration of AWS cloud directly with Salesforce.

Similarly, Amazon Redshift which is a fully managed petabyte-scale data warehouse service will be connected to Salesforce Wave Analytics. This will enable quick and easy analysis of large data sets.

AWS Internet of Things (IoT) will connect to Salesforce IoT to allow linkage of device data with customer data, helping businesses to develop services based on customer activity on connected devices.

Moreover, the new Alexa Toolkit for Salesforce will now enable developers to use the Salesforce learning platform Trailhead to develop Alexa Skills for Salesforce.

Another tool enables customers to establish secured connections between Amazon VPCs (Virtual Private Clouds) and Salesforce Heroku without having to use a public network connection.

Salesforce is the latest to join the long list of AWS users that include big names like Netflix (NASDAQ:NFLX) , Expedia (NASDAQ:EXPE) and Adobe Systems (NASDAQ:ADBE).

AMAZON.COM INC PE Ratio (TTM)

All in Amazon’s Favor

This is a big win for Amazon, which also recently helped Netflix move to the cloud. While Amazon remains the largest online retailer with significant growth prospects, all the excitement in recent times has been about AWS.

Note that Salesforce’s flagship CRM offering competes with Microsoft’s (NASDAQ:MSFT) Dynamics CRM. Microsoft ranks second in the infrastructure as a service (IaaS) segment, so Amazon (the market leader) is the best company that Salesforce could have gone to.

AWS Holds the Key

We see the move as Amazon’s latest gambit to increase its market share in the lucrative cloud computing business. It intends to give both sellers and customers a solid reason to opt for AWS.

Amazon Web Services is in the business of providing computing infrastructure so that companies don’t need to maintain their own IT infrastructure. It provides tools that support website production, social media and mobile applications that have taken the company to the top spot in the IaaS space.

It is the cash cow for Amazon. The business contributed $3.2 billion in the third quarter. It generates much higher margins than retail and therefore has a positive impact on Amazon’s profitability. Amazon remains the cloud infrastructure leader, well ahead of Microsoft, Alphabet (NASDAQ:GOOGL) and IBM (NYSE:IBM).

However, the speed at which businesses are moving to the cloud and innovating in the space has intensified competition. This also puts pressure on Amazon’s resources.

Shares of Amazon have been steadily treading higher on a year-to-date basis. The stock generated a return of 9.54% compared with the Zacks Electronic Commerce industry's gain of 6.49%.

We remain positive about AWS' growth prospects. Amazon’s continuous efforts to launch new features, open more data centers globally and constantly lower prices will give it a competitive advantage. We remain optimistic about the functionality, partner ecosystem and the experience that AWS offers and believe this will lead to continued customer wins.

Zacks Rank

Amazon currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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