Leaders in their various fields, the three have found amazing ways to cooperate and better serve their customers.
This article involves three completely different kinds of businesses that have found a way to co-operate with on other in a unique way. In short, Microsoft (MSFT) will offer its customers to build Ethereum (ETH-USD)-based blockchain solutions on its Azure cloud platform, and Starbucks (SBUX) will use Azure and the Ethereum blockchain to track and benefit its coffee farmers. It is, to my knowledge, a unique partnership with no losers and only winners.
Many readers will perhaps be familiar with one or two of the businesses described, but for many an explanation of each business is required.
Quick explanation of Microsoft
Microsoft are leaders in the designing of software for home computers, with its most prominent products being Windows Operating System and Microsoft Office. It is also a force to reckon with in the cloud storage business. Its cloud storage platform, Azure, lets developers connect and integrate a wide range of tools and services at one place.
Quick explanation of Ethereum
Ethereum is the world's most popular blockchain-based technology for apps (called dApps) and games. It is the first blockchain in the world with the capability of processing code. Among 2000 other cryptocurrencies, Ethereum is the one that most developers use as a backbone for their projects.
Quick explanation of Starbucks
Starbucks is the world's largest coffee chain with 24,395 cafes in 74 countries, with a clear focus on social responsibility and providing high-quality coffee and non-alcoholic drinks.
Source: Starbucks Believes In Blockchain Tech, Microsoft Involved, Invest in Blockchain
What it means for Microsoft
Microsoft recently announced that it is launching an Ethereum development kit on Azure. This proves that the company understands the power of blockchain technology and wants to be among its leading investors when it reaches the masses.
Microsoft released the kit as an extension of its already very powerful Visual Studio code. Visual Studio is a must for any serious developer because it offers tons of possibilities for coders of many programming languages, plus features to interact with databases and build advanced predictive analytics features.
Now, with the integration of the Ethereum blockchain, developers can integrate blockchain with all the other features Azure offers.
The main strength of Ethereum compared to the other 2000 cryptocurrencies lies in its power of smart contracts and "code is law" plus its first mover advantage of processing capabilities on the blockchain. This has made Ethereum the by far, most popular blockchain for developers of blockchain apps (dApps) and games.
A major drawback in the use of Ethereum for programming activities used to be the fact that developers of Solidity (the programming language developed by Ethereum) had to build every single feature running on Ethereum from scratch, making the work tedious and slow. Now that the blockchain technology has gained a high level of popularity among programmers, programming on Ethereum has become easier and faster.
Now Ethereum developers can let Azure take a big part of the processing plus connect their dApps to the already vast and growing number of features Azure offers.
Posts from Microsoft on GitHub:
Azure Blockchain service is a managed Ethereum service that you can deploy and interact with Solidity contracts as well as integrate into other Azure based services such as Azure Flow, Logic Apps or storage services like SQL Server or Cosmos DB.
Sure, there have been Solidity and other Blockchain technology extensions for Visual Studio Code published by others in the community, however now there is also an official set of tools published by Microsoft. This proves even further the investment and dedication that Microsoft is putting forth towards the use of Blockchain ledger technologies in the Enterprise, or even on the public blockchain networks.
Microsoft is also showing us its future plans for GitHub (the world's number one platform for hackers and code development). I believe the aim is to make GitHub the go-to place for hobbyist, companies, hackers and pretty much everyone interested in free code projects.
We also see that Microsoft is encouraging all sorts of open source project, even paying its own staff to develop on the Ethereum blockchain.
This may seems like wasteful thing to do for companies such as Google (GOOG), Amazon (AMZN) and Microsoft, but if we look deeper into the solution offerings they provide (I have written extensively about Microsoft's products here), we can see that Microsoft no longer fights open source code, it actually encourages it in every single way.
Bad business for Google, Oracle (ORCL) and Amazon, which likes to hide most of its important code. Some even claim Amazon steals open source code ("The crusade against open-source abuse," TechCrunch).
Great business for Microsoft, which nowadays sees open source code as an important part of business life and does everything in its power to help open source projects by providing services for open source to integrate with, such as Azure. Microsoft's core business in the future will be Azure and not Office or Windows, and the company knows it.
Instead of fighting open source like its competitors, the company helps open source project succeeds and become more powerful, and if an open source project could start to compete with Google, Facebook (FB), Amazon or Oracle in the future with features build in GitHub and Azure, so much the better.
This is why it is a wonderful bet on open source features for Microsoft, as it seems to be saying to itself, "Do not make open source coders angry. Help them and their community instead, and they will start using your features instead of your competitors' whom they will be unhappy with."
What it means for Ethereum
Ethereum has something that Bitcoin does not. Its ability to be able to process code has made it the best blockchain tool for the largest ecosystem of cryptocurrency projects and solutions. In fact, according to Forbes list, 50 big companies building blockchain solutions use Ethereum.
As I wrote above, Microsoft now officially supports building of smart contracts in Solidity on its wildly popular Visual Studio Code editor.
This means Ethereum developers are empowered with Microsoft's cutting-edge Machine Learning (AI) tools such as Azure Machine Learning Studio and Azure Cognitive Services, plus all the other services Azure offers.
Microsoft is not the only one that has noticed the endless opportunities attached with Ethereum. Ernst & Young (one of the largest professional services firm in the world) is rolling out free software running on the Ethereum blockchain for its corporate clients.
Clearly, Ethereum is quickly establishing itself as a global leader in enterprise-level blockchain technology, and will be very hard to stop at this point.
(Source: "Ethereum Will Be Hard To Stop At This Point When 200+ Banks, More Than 50 Billion-Dollar Companies Including Microsoft Azure Involved," Invest in Blockchain)
You may have heard of JPMorgan's (JPM) cryptocurrency, the JPM coin. It is powered by Quorum, an enterprise-focused version of Ethereum. More than 200 banks now use the JPM coin.
What it means for Starbucks
GeekWire reports that Starbucks will use Microsoft's Blockchain Azure Service to track coffee production. The company also described other initiatives it is working on at the Microsoft Build developer conference.
The aim is to bring greater financial possibilities for coffee farmers and let users and customers track their coffee back to its source. This is a perfect use case for Ethereum, because it is fully transparent, with thousands of individual nodes verifying the transactions. Everyone can freely track each transaction being made on Ethereum via Etherscan.
This is all part of Starbucks' "bean to cup" program with the intention of gathering real time information about the supply chain and supporting farmers.
Kevin Johnson, CEO of Starbucks, said:
Over the next two years, we will look to demonstrate how technology and innovative data platforms can give coffee farmers even more financial empowerment. We’ll leverage an open-source approach to share what we learn with the rest of the world.
Starbucks is actively strengthening its brand by helping farmers get a fairer share of their work and also making the crypto community like the brand more.
Starbucks said it worked with more than 380,000 coffee bean farms last year. The company promised to open source the pilot program and share what it learns.
What open source platform is by far the largest in the world if not Microsoft-owned GitHub?
Potential issues for investors
The risk it poses for Microsoft
Microsoft is taking a big bet on open source. Many open source projects aim to compete with or even disrupt existing tech. Thus, Microsoft may end up helping other projects take slices of its own business. Other big companies such as Google and Amazon are more wary about open source, since they have the potential to take market share from them and not nearly as helpful as Microsoft to open source.
The Risk it Poses to Ethereum
Ethereum is a very popular blockchain technology that can be used to build solutions, but it has major issues with scaling. Ethereum currently needs consensus among its nodes, requiring everyone to agree on each transaction, which results in the use of lots of computing power. Also, because Ethereum acts as a gigantic decentralized supercomputer, it causes stress on the network when many are using it at the same time. This has caused prices for transactions to be quite expensive, currently costing about six dollars to make a fairly fast transaction. The cost fluctuates heavily, but it is currently unsustainable to pay such a high price for a transaction.
The Risk it Poses for Starbucks
Blockchain is a direct threat to many banking and card issuer businesses. It is not impossible that companies like Visa (V) or Mastercard (MA) are forced to make customers choose either them or cryptocurrency. Card issuers might stop doing business with companies accepting cryptocurrencies as payments, forcing Starbucks to choose one of them, while inevitably angering either their cryptocurrency-paying customers or their card-paying customers.
Starbucks also risks having bad press if anyone finds out it has been treating coffee farmers negatively. Every transaction can be traced on the blockchain, therefore the company must be absolutely sure it conducts its business in the best possible manner.
This partnership between the three described entities is a "win-win-win" deal. It strengthens each individual business, as well as putting it in the first-mover advantage over its competitors, leveraging technology from both blockchain and Artificial Intelligence.
Microsoft benefits by increased user ability on Azure and increased revenues from Starbucks and solutions built on the Ethereum blockchain.
The stock has risen a lot in the past, but I believe there is more coming. Azure continues to position itself as a leader in its field.
Ethereum benefits by increased adoption from businesses on the blockchain, as well as a potential super customer in Starbucks. Imagine what would happen with Ethereum price if people could buy Starbucks coffee with Ethereum (it would explode).
Ethereum has seen a huge drop, from 1300 dollars per coin down to 86 dollars at its lowest point. In the last three months it has seen huge increases, and at the time of writing of this article it trades for 171 dollars. Ethereum is volatile, but we see its unique capacities for real-world adoption, and I believe 171 dollars per coin will look like a bargain in the future.
Starbucks benefits by strengthening its brand. Potentially with the use of the Ethereum blockchain, its customers could pinpoint exactly where in the world its coffee came from and also see how much the coffee farmer received in compensation, increasing its customers' experience. Starbucks is also increasingly being loved by crypto enthusiasts because of the help it does to crypto adoption. It is estimated that there are over 7 million crypto enthusiasts in the world. This means 7 million people who will more likely buy their coffee from Starbucks than a competitor in the future.
Starbucks stock has also increased nicely in 2019. I believe the company's increased branding efforts will pay off. If the economy takes a downturn from here or even enters a recession, Starbucks may still thrive, as people are not likely to give up their coffee in the first place. Plus, numerous crypto folk are likely to buy their coffee from Starbucks.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in MSFT, ETH-USD, SBUX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.