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Behind the Microsoft-Baidu Cloud Partnership

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Oct. 3 2017, Updated 9:09 a.m. ET

Apollo to use Azure outside China

Microsoft (MSFT) was recently tapped as the preferred cloud infrastructure provider for Baidu’s (BIDU) open-source autonomous driving platform, Apollo. Members of Apollo contribute technological resources to the platform to support key features and functions of driverless vehicles.

According to Baidu, more than 50 organizations and companies have joined the Apollo initiative. Apollo members include Intel (INTC), Ford Motor (F), Bosch, and Chinese automakers Chery Auto and Changan Automobile.

Bringing Microsoft on board means that Apollo partners can rely on Microsoft’s Azure cloud to run their autonomous driving applications outside of China (MCHI).

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Much-needed boost for Microsoft

For Microsoft, the deal with Baidu for Apollo cloud support is a much-needed boost to its cloud business at a moment when it’s working hard to catch up with Amazon.com (AMZN) and spread its cloud influence.

Although Microsoft’s Azure is one of the world’s largest cloud platforms, it lags behind Amazon’s Amazon Web Services or AWS in terms of market share. It also faces growing competitive pressure from rival services by Alphabet’s (GOOGL) and Oracle (ORCL).

The deal with Baidu could provide Microsoft with a launching pad to win more large cloud customers. Microsoft is retooling its sales force to drive the sales of large cloud packages.

Potential impact of autonomous driving

As the chart above shows, consulting firm McKinsey estimates that autonomous driving could add $1.5 trillion in new revenues to the automobile market by 2030. The firm also projects that fully autonomous vehicles could account for up to 15% of all new car sales by 2030.

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