The News: FedEx announced it will shutter its data centers and mainframe computer systems by 2024, as the logistics and package delivery giant moves its infrastructure entirely to the cloud to gain an anticipated cost savings of about $400 million a year. The total cloud transformation was announced at the recent FedEx Investor Day event by CIO Rob Carter, who said the company is aiming for a cloud-enabled, “zero data center, zero mainframe” environment as it moves to cut costs in a highly competitive marketplace. Read the full story from Data Center Dynamics.
FedEx Data Centers, Mainframes Shuttering in 100% Cloud Move
Analyst Take: News of FedEx shuttering its data centers and mainframes as the company moves entirely to the cloud by the end of 2024 is a bold move, and one focused on cost savings — a solid repositioning as competitive dynamics heat up in the logistics industry where FedEx needs to defend its share position.
FedEx’s annual market share as of Q1 2022 among major shipping and logistics companies totaled 37 percent, coming in second to UPS, which had a market share of 39.9 percent, according to data from CSIMarket.com.
But UPS is not the only big shipper breathing down the neck of FedEx – Amazon is also giving FedEx fits, according to an October 2021 story from SupplyChainDive.com. The story reported on an annual Pitney Bowes shipping index study for 2021 that showed Amazon Logistics shipping more packages than FedEx for the first time, based on 2020 figures. Amazon Logistics had 21 percent of the shipping market share in the Pitney Bowes study, while FedEx had 16 percent of the market. The United States Postal Service held 38 percent, while UPS garnered 24 percent, according to the study.
This threat from Amazon – which overtook FedEx for the first time in the Pitney-Bowes study – must be playing a role in FedEx’s evolving strategy.
Seeking every competitive advantage possible in an extremely competitive global shipping marketplace is something every player in this space must prioritize.
FedEx’s Move to Zero Data Center, Zero Mainframe Infrastructure
FedEx’s move to a zero data center, zero mainframe infrastructure is not new. This process began more than a decade ago, according to Data Center Dynamics, as FedEx has been working to eliminate its monolithic infrastructure and move needed applications to cloud-native environments that incorporate flexible deployment across the company’s systems.
Yet even as FedEx takes this approach, we are not seeing similar moves being made broadly across the enterprise marketplace. Powerful mainframes and traditional data centers – located on-premises, remote or hybrid – continue to have a strong presence across a wide range of industries and companies in today’s technology ecosystem and marketplace — and with good reason. There are many instances where the mainframe and/or traditional data centers serve enterprise customers exactly as they need. And it’s important to remember that as beneficial as cloud infrastructure can be, cloud-first is not always the answer for every organization.
The Potential Risks Ahead
FedEx’s move to shift its infrastructure entirely to the cloud will without question be perceived as risky by some organizations. Migration issues, connectivity with partners, a strategy for dealing with potential outages — all of these things could come into play. Although to be fair, since this move has been planned and underway for some time now, it would be safe to assume that FedEx has thought this move through with great specificity and safeguards in place.
FedEx aside, we don’t believe this signals the start of a tidal wave of similar moves by large enterprises entirely, or even primarily, to the cloud.
For FedEx, it’s clearly a targeted strategy as the company seeks cost savings in a battle with competitors over the last mile in the turbulent shipping marketplace. Amazon has shown that investing in shipping innovations is a top priority and is already working to get its coming fleets of unmanned delivery drones into the skies. The battle between competitors in the shipping and logistics arena will only get tougher — moving to save money and the jump to the cloud appears to be the weapon of choice for FedEx.
It will be interesting to watch this play out.
With contributions by Futurum analysts Shelly Kramer, Ron Westfall, and Michael Diamond
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.