The fight for cloud computing dominance is at its peak and the leaders are starting to show their faces. When it comes to IaaS, Amazon AWS has a big lead, followed by Microsoft Azure, IBM Cloud, Alibaba, and Google Cloud Platform. If you were wondering where Oracle was, Gartner doesn’t place the company in its Top 10 in revenue but does add it to its “Magic Quadrant”. PaaS and SaaS are important, of course, and in some ways is the bigger dollar opportunity.
Amongst customers, there is also a tremendous amount of interest around hybrid cloud and multi-cloud. When you cross-section that against the potential business opportunities of 5G, IoT, and AI, things get very interesting. I wanted to dive into the cloud announcements AT&T and Microsoft made this week, focusing more on what AT&T wants from Microsoft than what it is providing to the tech giant.
A new AT&T
First, let’s take a look at some background on AT&T. Many may not realize this, but AT&T is not just the phone company anymore. The company’s Q1 earnings this year showed a number of notable business breakouts. Its Mobility sector (which includes smartphones, wearables, tablets, and consumer wireless services) is now an $18 billion-dollar business. Its Entertainment Group, including DirecTV, DirecTV Now, and its AT&T Fiber broadband service, now totals $11 billion. Meanwhile, Business Wireline (business equipment and services) is up to $6 billion, its Latin America sector is up to $2 billion, WarnerMedia is up to $8 billion, and Xander, an advertising company under its umbrella, is up to $.5 billion. This is not your grandfather’s AT&T.
A big win for Microsoft
This is all relevant context to the telco giant’s announcement today of a multiyear, wide-reaching partnership with Microsoft on cloud, AI, and 5G. AT&T is in the midst of what it calls a “public cloud-first” strategy, with the goal of moving the majority of its non-network workloads onto the public cloud by the year 2024. Of note, AT&T gave its business network business to IBM. While AT&T will retain responsibility for its own core networking operations for cell phones and other devices, this partnership gives AT&T a landing pad for those non-network workloads: Microsoft Azure. Additionally, AT&T’s workforce (of approximately 268,000) will now have access to Microsoft 365’s cloud-based productivity and collaboration tools.
Microsoft says, in turn, will be able to leverage the innovation enabled by AT&T’s 5G network. This could be particularly useful for Microsoft as it designs, builds, and tests edge-computing solutions that benefit from the high speed and low latency of 5G. I have always wanted to see HoloLens support 5G as it could offer Remote Rendering without needing WiFi. In addition to the intelligent edge, the companies say they will collaborate on integrated solutions in networking, IoT, public safety, cybersecurity. Microsoft has one of the few end-to-end IoT solutions spanning from the deep edge silicon to the private and public Azure and Azure Stack cloud. The partnership also gives Microsoft a new partner to sell its edge computing services. Not surprisingly, they will also work together on voice, collaboration, and conferencing tools. Teams is an incredible platform for this and currently leads the enterprise market after only two years.
It was harder than I thought to compare and contrast the AT&T-Microsoft and AT&T-IBM deals. It appears IBM has the network and business division side and Microsoft got everything else. The press release positioning was interesting, too. The AT&T-Microsoft press release cited both CEOs, Microsoft’s Nadella and AT&T’s Donovan, IBM’s did not.
Purportedly worth over $2 billion, this deal marks a huge win for Microsoft Azure in its effort to increase its cloud business and the partnership looks to be a smart strategic one for both parties. Both have a lot to gain from and share with each other, and I expect it will bear some good details on AI, IoT, and 5G-enabled solutions. Microsoft will help AT&T realize its “public cloud-first” vision, and in return, it receives a significant boost in the public cloud war for dominance. AT&T’s large workforce gains the benefits of Microsoft 365, one of the most powerful cloud-based productivity tools available today. It’s a solid win for Microsoft.