Microsoft: The Surprise Wildcatter

As a front-row observer to the energy transition, I have the fortunate position to see which firms are making positive strides to enable and ride the movement. While I mostly focus on the early stage environment, I also get to see which incumbent firms are creating pivotal positions in the transition. Microsoft is one of those well-positioned incumbents becoming the technology backbone to the energy transition and industrial technology movement. The how and why was written on my recent Forbes post.

The link can be found here: “Microsoft the Surprise Wildcatter”

Microsoft the Surprise Wildcatter

Microsoft is the operating system for the desk worker at most energy and industrial firms. Mac computers are rare and ruggedized PCs bridge the office and the field.

Based on a flurry of recent press, it is evident that Microsoft is interested in expanding their default status in the white-collar cubicle to dominance out in the operating environment. Microsoft’s approach to taking over the energy vertical is much like the technique of the earliest oil renegades: the wildcatter.

Why is Microsoft refocusing here NOW?

A decade ago the cost to digitize and connect remote operations was prohibitively expensive. A decline in sensor costs, networking costs and edge compute costs now allows edge production environments to be big generators of data and consumers of compute. Just as wildcatters speculatively prospect for hidden or previously unloved assets, Microsoft is revisiting the O&G space to see if they can expand technology sales to the new field opportunities. And of course, Microsoft is not alone in this land-grab mode. Like the wild west, the physical operating environment provides sizable greenfield environments and all of the cloud and compute giants like Microsoft, Google, and Amazon are aiming for the new revenues. While the battle will be fierce, Microsoft is making a big land-grab right now.

The Wildcatter: Microsoft + Energy & Industrials

Microsoft represents a story of resilience that the energy and industrial vertical wants to embrace and believe. At one point, Microsoft was written-off as Google and Amazon charged ahead into the enterprise. And yet, under Satya Nadella’s leadership, Microsoft has roared back in the enterprise segment and is solidifying and expanding its’ technology footprint in these asset heavy verticals. Analog firms love this Microsoft story and appreciate the strength of the logo.

Microsoft is employing a consistent technique to expand is these areas:

Step 1: Microsoft acquires a PPA or makes a purchase commitment to get a conversation going with the energy company

Step 2: Microsoft closes the much more lucrative cloud and software contract by promising to infuse “digital” into the more analog firm

Here are the examples:

Microsoft + Shell: Microsoft agreed to purchase power from a Shell-developed renewable energy site. But most importantly both companies agreed to a technology JV, where Shell will utilize Microsoft compute services to develop artificial intelligence technology that helps Shell access real-time data insights and improve the efficiency of their operations, leading to lower emissions. Microsoft also committed to offer new digital tools for Shell to deliver to Shell’s own customers.

Signal: Shell is doubling down on Azure and Shell’s customers are also encouraged to use Microsoft Azure.

Microsoft + BP: Microsoft agreed to purchase power from a bp-developed renewable energy site. (Can you see the trend!) Alongside this PPA, bp and Microsoft agreed to “co-innovate” between Microsoft’s digital expertise and bp’s knowledge of the energy markets. These areas include smart cities and smart consumers.

Signal: BP is doubling down on Microsoft Azure

Microsoft + ENGIE: Microsoft purchased 230MW of utility scale wind from ENGIE. And ENGIE responded by committing to running their entire 15,000 MW energy portfolio on Microsoft’s Azure cloud services. That is a massive win for Microsoft’s cloud product.

Technology and oil gas
WILDCATTERS

Signal: ENGIE worldwide is doubling down on Microsoft Azure

Microsoft + Rockwell: Rockwell is taking steps to build better software solutions for their energy and industrial customers. The firm intends to deliver these products by expanding a partnership with Microsoft, the dominant existing technology partner in the industrial vertical. Case in point: just this week the two firms announced a 5 year co-development effort to deliver all new Rockwell industrial technology applications to customers through Microsoft Azure.

Signal: Rockwell is doubling down on Azure and Rockwell’s customers are also encouraged to use Microsoft Azure.

Conclusion

In the coming quarters I expect we will see many more partnerships between Microsoft and the stalwarts of the energy and industrial verticals. I believe that Microsoft will have an outsized influence on the energy transition and industrial technology movement. Microsoft is leveraging their IT strength into a stronghold on the OT environment and locking in customers that will depend on the Azure cloud for decades. Much like a successful wildcatter, these accounts will be paying dividends to Microsoft well into the future.