UPDATE: Bayer inks new digital ag data infrastructure deal with Microsoft: how significant is it?

UPDATED: 19 November, 2021, 15:36pm GMT to add comments from a Microsoft spokesperson about data sources and revenue generation through the partnership.

We’ve all seen those announcements before: Company X ‘partners’ with Amazon or Microsoft to ‘enhance’ their digital capabilities.

Translation: Company X is now an Amazon AWS or Microsoft Azure customer – ie, they’re using the tech giants’ processing power for their digital platforms. Not exactly news, which usually means a pass for AFN.

When Bayer reached out this week with details of a new deal with Microsoft Azure, my immediate reaction was that it was something similar in support of its farm data product, Climate’s FieldView. But reading the initial press release, it looked like this could have a broader impact on the agtech industry, significant ramifications for ag data more broadly, and be a major new revenue stream for both Bayer and Microsoft.

According to the release, the organisations are building “a new cloud-based set of digital tools and data science solutions for use in agriculture and adjacent industries, bringing new infrastructure and foundational capabilities to accelerate innovation, boost efficiency, and support sustainability across value chains.”

This new “off-the-shelf infrastructure” could be licensed by startups as well as large, global enterprises, for use in their own “farming operations, sustainable sourcing, manufacturing and supply chain improvement, and ESG monitoring and measurement” offerings, the companies said.

Foundational tools for the industry

To understand what this means exactly, I set up a call with Bayer’s new head of digital farming solutions Jeremy Williams, who, eight months into his new role, told me he had inherited this deal with Microsoft, which has been some time in the making.

According to Williams, it’s much more than a case of Bayer white-labeling Microsoft Azure’s processing capabilities; the two organisations are going one-step further to create a cloud infrastructure that’s not just storage but provides “foundational” digital ag tools for clients to license. Combining “assets Microsoft and Bayer have individually” they’re building “from scratch” a platform that can save individual companies, developers, and entrepreneurs from reinventing the wheel, he told me, somewhat vaguely. The platform will include foundational data science capabilities such as ingesting and processing satellite imagery, he exampled. 

“Imagine you are a company that’s contracting commodities from growers and you want to help them track their practices better; instead of building that software internally, you can leverage this set of tools to do things like that,” he said. “What’s exciting is that this will be useful not just for bigger enterprises, but for agtech entrepreneurs too who, instead of investing in core digital capabilities, can focus on differentiating their products instead.”

“There’s a tremendous amount of data generated in agriculture and adjacent industries but it’s often disconnected, incomplete and with many errors; lots of work has to go into processing and harnessing it to turn it into useful information for customers,” said Williams. “We believe that not everyone needs to spend their resources doing that foundational work; we can allow companies large or small to focus on the things that are strategically important for them, while they rely on us for their core capabilities.”

Of course, Bayer will also be able to use the new infrastructure to the benefit of FieldView and Williams referenced the premium insights it will be able to offer its users. But it looks like Bayer, and Microsoft to some extent, are viewing this as a new business and revenue stream; a Bayer spokesperson said that “Microsoft will activate its global sales force and consulting team—focused on promoting platform solutions and services—to sell the platform to an active customer pipeline.” 

While Williams said it was too early to go into too much detail, “components of the model” will involve a revenue share between the two companies as they license the infrastructure and capabilities to third parties.

A Microsoft spokesperson said: “We look forward to partnering with Bayer to accelerate their transformation and then offering those some capabilities to customers, ISVs, startups, and enterprises in the agriculture industry and beyond. Microsoft has a well-established partner business model, and we will leverage a better-together co-selling approach with Bayer to reach companies on a global scale.”

What’s the significance?

I’m still in the process of asking around what the industry thinks the significance of this is. Some said it was not much more than a typical processing deal as illustrated above; others that it was a trumped-up way of attracting more ag companies to Microsoft’s Azure services and agtech developers to connect with FieldView. But some said the partnership could demonstrably support the entire industry.

Will Wells, founder of Hummingbird Technologies, the remote sensing and AI platform for regenerative ag, said the deal could be a “game-changer” and that the partnership could build something “really powerful.” Wells talked about how Hummingbird and others will have spent millions of dollars over the years on ingesting, processing, storing, and then analysing very large datasets combining weather, imagery, and more. Just one example of a service Hummingbird offers — identifying deforestation in Brazil — involves terabytes of data, he exampled. “A cloud platform like Azure to partner with a data platform like Bayer’s Climate could potentially do all the leg work for customers or downstream analytics companies and save a lot of the hassles of engineering, but, more importantly, save them huge costs.”

Tech companies and startups then just need to focus on building their predictive models and algorithms to analyse that data for clients, he added.

So what’s the end goal for Bayer — and Microsoft — with this partnership? Could Bayer finally start to make direct revenues from its big digital investment that’s arguably cost it all those billions it’s had to pay for glyphosate lawsuits in recent years after its acquisition of Monsanto (and with it, The Climate Corporation and FieldView)?

Williams described Bayer’s “digital farming” platform as having three core ways of creating value – i.e. making money – for Bayer.

1. By providing insights and transparency around how clients are using Bayer’s “physical products” — its seeds, chemicals and inputs — and their farming operations, Bayer can better position and sell those products by making more relevant recommendations and so on. Since it was always so hard to make money out of FieldView on a subscription basis, this was always how I understood Monsanto and later Bayer to measure the value of their digital investment, until more recently.
2. By creating new business models for Bayer. Over the last two to three years, Bayer has started using the digital platform to visualize and build new business models around outcome-based, risk-sharing with customers. This is where farmers pay Bayer to guarantee them a certain yield, if they follow specific guidelines based on digital recommendations and predictions, instead of just paying for a product without any assurances. Incentivising practices that can help to sequester or carbon storage would fit here too. “It’s presented new ways of interacting with our customers and is another way we see digital bringing value to us as a company,” said Williams. BASF indicated its Xarvio digital platform was tuned for just this in 2019.
3. By licensing digital capabilities through this partnership with Microsoft. FieldView currently has 70 platform partners but Williams believes this new platform with Microsoft will expand the ecosystem even more.

Meta of agriculture?

But perhaps the biggest question is what a combined effort on agricultural data between this tech behemoth and agriculture giant looks like longer-term?

“I wonder what percentage of the ag data universe is now flowing through that monolithic combined platform?” asked Wells. “It sounds a little bit like the Meta (previously Facebook) of agriculture.”

FieldView is the world’s largest digital ag platform, currently used on more than 180 million farming acres across more than 20 countries. Microsoft also has a large footprint in agriculture through FarmBeats, a partnership with Land O’Lakes, and more broadly if you look at related entities like the Gates Foundation and other Gates-backed investment vehicles. That’s a lot of agricultural data.

Data ownership and privacy is a continued theme in agriculture, and there are longstanding concerns about the amounts of data owned by large enterprises in the industry, especially Bayer. Microsoft declined to comment about what data sources it will be bringing to bear in this partnership, or how the tech giant views the significance of this partnership internally. Williams said that all data used on the platform will be provided by the customers — in the case of FieldView, that’s the farmers and he emphasised the private nature of that data.

Bayer officials told Successful Farming that the partnership “does not and will not change Bayer’s or FieldView’s privacy statement or commitment to stewarding customer data” and that the company will not share customer farm data with third parties like Microsoft without consent.

“Microsoft has built a trusted cloud solution with millions of customers around the world across multiple industries – including healthcare, financial services and retail,” said a Bayer spokesperson. “Their approach to data security and compliance aligns with Bayer’s, and FieldView remains compliant with all regional data privacy and data storage regulations.”

What do you think?

It’s the norm for journalists to be extra skeptical of corporate announcements as we aim to avoid giving them free marketing where it’s not due. But I can also fall victim to reading too much into these types of announcements and maybe that’s the case here. So please, let me know what you think ASAP!