Microsoft Corp. and Wal-Mart Stores Inc. are building on a strategic partnership announced in July that saw them commit to using the Redmond software giant’s cloud, artificial intelligence and “internet of things” tools to modernize the retailer’s business operations.

Microsoft and Walmart today said they’ve created a new “cloud factory” at the latter’s existing Innovation Hub (pictured) in Austin, Texas. Known as “4.co” due to its location on the corner of Fourth and Colorado streets, the joint engineering facility is set to open early next year and will be staffed by a team of 30 technologists from both companies.

One of the goals at the facility will be to help Walmart move thousands of its internal business applications over to Microsoft’s Azure cloud platform. The engineers will also work together to develop brand-new, cloud-native applications. In order to do so, the companies will make use of Microsoft’s cognitive services, chatbot and machine learning tools, Clay Johnson, executive vice president and enterprise chief information officer at Walmart, said in an interview with Microsoft Transform.

Microsoft’s and Walmart’s partnership appears to stem from a desire from both companies to ward off the threat to their businesses from Amazon.com Inc., which is the biggest rival to both. Amazon, through its Amazon Web Services Inc. business, has a strong lead over Microsoft when it comes to providing enterprise cloud services. The company also rivals Walmart with its online retail business and through its $13.7 billion acquisition of Whole Foods Market Inc. last year.

One of Microsoft’s strategies to counter AWS has been to position itself as the best cloud platform for developers of industrial internet and smart buildings applications. Walmart’s enormous network of stores and warehouses provides an ideal testing ground for new technologies, products and services in this area. The retailer has already installed IoT sensors in its refrigeration and freezer systems at more than 5,000 of its U.S. stores and uses these to ensure temperatures are kept within the required range.

“True to the motto of ‘your enemy is my enemy,’ Walmart is partnering with Microsoft to use its technology and services to build is next-generation applications in the cloud,” said Holger Mueller, principal analyst and vice president of Constellation Research Inc. “As such they have achieved a new level of cooperation on artificial intelligence, and a new level of usage for big data. Hopefully, this will help Microsoft to become a better cloud infrastructure platform. For Walmart, it will be interesting to see how these new applications will help it to compete with Amazon.”

The companies have also built some internal chatbots, including one for associates to ask questions about their benefits packages, using Microsoft Cortana’s framework.

Photo: Walmart