SAN FRANCISCO — As watershed industry moments go, this one could be defining.
Microsoft is welcoming marijuana compliance company Kind Financial onto its Azure Government cloud platform, marking a legitimizing first for the legal cannabis business while positioning the technology giant at the vanguard of a potentially lucrative new industry.
Los Angeles-based Kind, which provides seed-to-sale tracking solutions, had been a commercial client of Microsoft's Azure cloud since its 2014 debut. But after nearly nine months of talks with Microsoft officials, Kind CEO David Dinenberg got the word his company would be promoted to Azure Government, a separate cloud platform whose security and compliance protocols are geared toward entities that interact with federal agencies.
"Thanks to Microsoft's huge reach, it'll be easier for us to target every state with our compliance solutions," says Dinenberg. "It's a win-win for both of us as more states look to legalize medical marijuana."
Kimberly Nelson, executive director of Microsoft's state and local government solutions division, said in a statement that "Kind agreed that Azure Government is the only cloud platform designed to meet government standards for the closely regulated cannabis compliance programs and we look forward to working together to help our government customers launch successful regulatory programs.
For Microsoft, welcoming a cannabis-focused data management company onto its specialized cloud points to the dynamic thinking coming out of the office of CEOSatya Nadella, who is two years into his plan to pivot away from a crumbling software licensing model and toward a cloud- and mobile-first business.
Last week, Microsoft made a $26-billion bet on professional networking site LinkedIn, whose purchase is aimed at bolstering its mission to make its suite of Office products a must for enterprise customers. While helping Kind start its Government Solutions arm via Azure Government is small potatoes by comparison, there is are no doubt that being first into a growing sector could prove lucrative for Microsoft down the road.
In 2015, marijuana sales hit $5.7 billion, but are expected to jump to $22 billion by 2020, according to industry analytics firm New Frontier.
"Its undeniable that Microsoft's interest in this industry shows we are maturing," says New Frontier CEO Giadha DeCarcer. "Not only will the perception of companies in the cannabis space improve externally as a result of this news, but it'll also mean that everyone from Mom and Pop businesses to sophisticated multinationals will see their opportunities improve."
Currently, 25 states have legalized medical marijuana use, ranging from Alaska to Washington. The seismic shift for the industry is expected to come when states opt to legalize recreational use. So far, only a handful have — including Colorado and Oregon — but this fall five more states, including pivotal California, are expected to vote on the matter.
Much like alcohol and tobacco, marijuana is a federally regulated substance whose sale must be rigorously tracked and catalogued. Companies such as Kind offer end-to-end solutions that offer marijuana-related businesses, regulatory agencies and financial institutions a way to interact while remaining compliant of state and federal regulations.
"I can't put into the words the responses I've been getting from others in our industry," says Dinenberg. "We are all clamoring for credibility, and this made everyone smile."
Follow USA TODAY reporter Marco della Cava on Twitter: @marcodellacava