Microsoft and AWS Launch Direct Interconnect After Years of Dismissing Multi-Cloud

Microsoft and AWS Reverse Course on Multi-Cloud

Microsoft disclosed it is working with AWS on a combined Azure Multicloud Interconnect and AWS Interconnect product that lets enterprises establish private, high-speed links between infrastructure on both platforms. The offering targets large enterprises already running dual-cloud deployments, particularly in financial services and other regulated industries with private connectivity requirements.

The development is significant because both vendors spent years telling CIOs that multi-cloud was an anti-pattern. They are now commercializing the exact connectivity fabric they previously said customers barely needed. This shift from "you don't need multi-cloud" to "we'll help you run it" normalizes dual-cloud architectures as an accepted enterprise pattern, making it harder for either vendor's sales teams to argue against multi-cloud during contract negotiations.

What This Means for Network Architecture and Budget

Enterprises with AWS and Azure footprints now have a first-party option for private connectivity instead of relying solely on Equinix Fabric, Megaport, Colt, or other neutral interconnect providers. This simplifies procurement: instead of contracting with a colocation provider plus both cloud vendors separately, some buyers can negotiate bundled network and cloud commitments directly with Microsoft and AWS.

The product pricing will likely follow existing dedicated interconnect models—per-port charges plus per-GB egress and ingress fees on both sides. If priced competitively against third-party fabrics, this could reduce total cross-cloud bandwidth costs. But it also concentrates more network spend with the two hyperscalers, increasing their leverage over WAN budgets and potentially weakening the negotiating position enterprises gain from using truly neutral network providers.

Enterprises will need to model cross-cloud traffic costs explicitly. Multi-cloud bandwidth is no longer informal data transfer; it becomes a formalized product line with its own SKU and billing logic. CFOs and procurement teams should update cloud cost models to include direct AWS-Azure transfer charges, not just egress to the public internet.

Competitive Pressure on Neutral Interconnect Providers

The Microsoft-AWS interconnect directly competes with Equinix, Megaport, and other neutral fabric providers that currently act as the de facto multi-cloud backbone. It also pressures Google Cloud, which has positioned its cross-cloud networking and Anthos as a "neutral control plane" across clouds. Google now faces two hyperscalers collaborating on connectivity while it remains the third wheel.

For network design reviews and RFPs, this creates a new decision point: first-party AWS-Azure connectivity versus neutral third-party fabrics. The first-party option may offer tighter integration and simpler billing, but it increases strategic dependence on Microsoft and Amazon. Neutral providers still offer the advantage of avoiding deeper lock-in and supporting scenarios where Google Cloud, Oracle Cloud, or other platforms enter the architecture.

Multi-Cloud Tools Shift to Marketplace Procurement

Flywl announced that its Compass product is now available in Google Cloud Marketplace, and existing customers can charge subscriptions against Google Cloud committed spend. This is a procurement story, not a technology one, but it matters for budget allocation. Enterprises with large Google Cloud committed-use discounts can now fund multi-cloud governance and observability capabilities out of existing cloud commitments rather than requesting incremental budget.

This procurement lever tilts evaluations toward tools that integrate with cloud marketplace programs. A multi-cloud management product that is "free" against existing commitments beats a technically similar product requiring a separate purchase order. But it also biases the governance stack toward the anchor cloud—in this case, Google—even if the enterprise claims to be cloud-agnostic.

What to Watch

Pricing details for the Microsoft-AWS interconnect will determine whether this undercuts or matches neutral providers. Enterprises should compare total cost of ownership across first-party and third-party fabrics before committing to a connectivity architecture.

Watch for similar moves from Google Cloud. If AWS and Microsoft are collaborating on multi-cloud connectivity, Google will need to either partner with one of them or double down on positioning itself as the neutral layer across clouds.

Finally, track how cloud vendors handle cross-cloud traffic in contract negotiations. Now that Microsoft and AWS have formalized multi-cloud connectivity as a product, enterprises should push for committed-use discount terms that include cross-cloud bandwidth, not just intra-cloud transfer. The existence of this interconnect gives buyers leverage to negotiate better multi-cloud economics.