News: Tech giant will provide cloud services to start-up R3.
Microsoft has formed a partnership with banks to speed up adoption of blockchain technology in the financial industry.
R3 is a New York-based startup, which counts Goldman Sachs, Citigroup, Bank of America, and Morgan Stanley as its major clients. The partnership enables the banks to gain open access to Azure.
Under the deal, Microsoft will provide cloud-based tools, services and infrastructure for R3 lab locations around the world, as well as dedicated technical architects, project managers, lab assistants and support services.
R3 also selected Microsoft Azure as the preferred cloud services provider for its R3 Lab and Research Center which provides services to more than 40 member banks.
Blockchains, which are online ledgers to record transactions, have gained prominence following the growing popularity for the digital currency bitcoin.
Distributed ledger technology is expected to help in completing financial transactions with greater speed, security, cost-efficiency and transparency compared to the existing system.
Microsoft executive vice president, business development, Peggy Johnson said: "With intelligent, cloud-based technology, R3 and member banks will experiment and learn faster, accelerating distributed ledger technology deployment.
"What’s more, our collaboration brings to light tremendous opportunities to rethink business processes and transform entire industries."
R3 CEO David Rutter told Bloomberg that the blockchain would be deployed for commercial use in about a year.
It will take three to five years to notice a significant improvement in the commercial adoption of the technology, Rutters added.
Rutter added: "The partnership between Microsoft and R3 will scale the use of distributed ledger technology in a way that will change the entire financial services industry.
"The Azure platform and intelligent cloud services bring advanced capabilities to this budding financial ecosystem, and the commitment by Microsoft will accelerate the adoption of distributed ledger technology around the globe and take our R3 Lab and Research Center offering to a new level of capability."
Cloud-based service providers that can operate blockchain software for other companies are already vying to maintain supremacy in the market.
However, Microsoft’s decision to have a preferred vendor relationship with R3 may enable the company to gain clients from the banking sector. Microsoft will not buy any stake in R3 but will offer services and staff to the startup as part of the agreement.
Microsoft expects to gain business once R3 member companies start using blockchain technology. Barclays, Credit Suisse, Wells Fargo and UBS are some of the members of R3. Intially, Microsoft will offer its cloud services and tools to R3 labs globally.
Microsoft director of technology strategy Marley Gray, while giving an interview to the publication, said: "The R3 partnership will help us to see what technology actually works, what combination actually works.
"It actually increases our focus here at our highest levels. We see it as a tremendous investment for Microsoft."
With the deal, R3 and other consortium members will also have access to Microsoft’s ecosystem of BaaS partners.
Consortium member can gain access to technology which Ethereum and ConsenSys, Ripple, Eris Industries, Coinprism, Factom, BitPay, Manifold Technology, AlphaPoint, IOTA, BlockApps STRATO, Tendermint LibraTax.
It will help them in the development, testing and deployment of distributed ledger applications in cloud, hybrid and local environments.
Microsoft may increase the headcount in the project to 50 from a current count of five employees, Gray said.
Other tech giants like IBM are also stepping up efforts to advance the adoption of blockchains by the companies. IBM is a member Hyperledger Project that aims to "standardize the blockchain technology for various industries."
Hyperledger Project is a consortium that includes Intel, J.P. Morgan, CME Group, DTCC, and startups like Digital Asset Holdings and R3.
Endpoint Technologies Associates president Roger Kay said: "It’s certainly a feather in Microsoft’s cap, marquee banks lining up to run their blockchain projects on Azure.
"It’s probably more important from a prestige than from a revenue point of view, at least in the near term."