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SpaceX Partners with Microsoft for the Cloud, further straining Amazon

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On October 20, Microsoft announced a partnership deal with SpaceX to connect its Azure cloud computing network to the Starlink satellite internet service. 

Customers that are subscribed to the Starlink service will be able to both access and deploy cloud computing solutions. Neither Microsoft nor SpaceX disclosed the terms of the deal. 

SpaceX’s Business Model: Vertical Integration and Meaningful Partnerships

CEO and Chief Engineer Elon Musk has stated throughout the years that the Starlink project will face significant challenges. More specifically, the project incurs huge capital expenditures and operational costs.

SpaceX vertically integrates as much as possible both the production process and supply chains. The company does not rely on third parties neither to manufacture nor to operate its satellite constellation. SpaceX is thus both the satellite manufacturer and the internet service provider.

The aerospace company also has to ensure at all costs that the Starlink project is a commercially viable venture. SpaceX’s ultimate objective is to enable the human race to become a multiplanetary civilization. This implies raising as much capital as possible. Aside from generating periodic rounds of funding from investors, the Starlink project is the best solution available.

SpaceX has now an opportunity to vastly increase its Starlink customer base via the deal with Microsoft. Cloud computing is a lucrative proposition when it comes to establishing close relationships with enterprise-class customers located in remote areas. 

Why is the Partnership Important for Microsoft?

The deal is just as important for the tech company. Microsoft is seeking to expand its services into the space industry. 

A few weeks ago, the multinational corporation rolled out its Azure Orbital service that connects satellites directly to the cloud. 

Microsoft has recently developed its Azure Modular Datacenter (MDC), which is a mobile unit that deploys cloud computing capabilities for customers located in challenging areas. 

The Azure Orbital service can effectively connect Starlink’s network to those MDCs. Several Modular Data Centers have already been deployed and are currently being tested by companies in the private sector and the US military.

Partnership Other Facet: Competing with Amazon

Both SpaceX and Microsoft’s interests are aligned for a third reason, since they are now able to better compete against Amazon. 

The latter is offering a service to connect its AWS Cloud Service to satellite. Amazon is alsoseeking to deploy its own internet satellite constellation

The constellation, dubbed Kuiper, will consist of 3,236 internet-beaming satellites. In a blog post, Amazon stated that it will invest “more than $10 billion” in the project. 

SpaceX is in the process of increasing its Starlink constellation, whilst Amazon has yet to initiate its project. Assuming that its Kuiper constellation becomes fully-operational, Jeff Bezos’ company faces stiff competition from the get-go.

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