Microsoft Cuts Loose the Dogs of War in AT&T 5G Cloud Deal

Cloaked within Microsoft’s carefully worded press release about AT&T moving its 5G mobile network to the Azure for Operators cloud is the stark reality that one of the world’s wealthiest and most-innovative companies has just become deadly serious about transforming entire industries. 

(And I’m referring to Microsoft, not AT&T.)

On my weekly Cloud Wars Top 10 rankings, Microsoft is the longtime #1 and has a reasonable shot of generating a staggering $80 billion in commercial-cloud revenue this calendar year. But on my Industry Cloud Top 10 list, mighty Microsoft sits at #6 because it’s only recently begun to roll out its industry products and to date has not articulated a comprehensive and end-to-end industry strategy.

But with this AT&T deal, all that is about to change. And very quickly, I think.

Consider what’s happening here: AT&T, one of the world’s premier communications and networking company for decades, was clearly convinced that Microsoft could do a better job than AT&T in running its Network Cloud right at the dawn of what will surely be the world-changing 5G era 

That means that AT&T—the company that created the slogan that “the system is the solution”—now believes that Microsoft is better suited to run its cloud network so that AT&T can be free to create and sell high-level business services that run on that network.

If someone had suggested this just 5 years ago, I suspect that person would have been laughed out of the room.

But just 13 months ago, Microsoft tipped its hand very publicly with the acquisition of two companies in the networking and telecom space. Back then I wrote a piece called Microsoft Flexes Trillion-Dollar Muscles: Competitors Sweat, Customers Swoon. In my attempt to assess what this might portend for not just Microsoft but the communications industry overall, I offered this thought within that article:

Over in the network carrier and telecom space, the situation’s somewhat similar but less clear because that entire industry is being forced to cram about 50 years’ worth of change and innovation into a few years.

In our new digital world, where exactly do we now draw the lines separating networks, the edge, the cloud and virtualized services? 

If you’ve got a choice between taking a ride on an ox-cart with big wooden wheels (those would be some of the traditional carriers and telecom companies) or in a Ferrari (that would be Microsoft), which are you going to choose?

Microsoft clearly senses this perception of itself as crashing into what is a new category for them, sending incumbents flying, trampling some stragglers and grabbing the attention of everyone. Look at what Microsoft said in yesterday’s blog post describing its intention to buy Metaswitch Networks just 3 weeks after Microsoft closed the acquisition of Affirmed Networks:

“As the industry moves to 5G, operators will have opportunities to advance the virtualization of their core networks and move forward on a path to an increasingly cloud-native future. Microsoft will continue to meet customers where they are, working together with the industry as operators and network equipment providers evolve their own operations.”

Translation: “I come in peace.”

Microsoft has indeed just blasted its way into the heart of the communications industry and set itself up to be a global power-player in the 5G era. The AT&T 5G mobile network, part of what AT&T called the Network Cloud, will now become part of Microsoft’s own purpose-built and industry-specific Azure for Operators cloud.

Talk about shaking up an industry! I mean, it’s truly exciting that Microsoft and other major cloud vendors are creating industry-specific applications to help customers move into the digital economy and be able to run their businesses more capably and intelligently than ever before.

But what Microsoft’s doing here is on an entirely different scale: an entire industry cloud for 5G, which will rapidly become one of the most disruptive technologies of all time.

For the industry in general, this is both a wake-up call to the new stakes in the industry-cloud casino—no more $2 tables; we start at $500!—and an existential challenge that the rules of the game and indeed the game itself have been tossed out, and entirely new ones are being written.

And looking at the Microsoft-AT&T deal, perhaps the first of those new rules is this: don’t just create solutions for the industry; create the technologies that run the industry.

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