Microsoft aims to dislodge AWS as ‘preferred provider’ to telcos

Two years ago, Microsoft did something that left executives at Ericsson and Nokia sweating like soldiers before battle.

Within the space of a few weeks, Seattle’s biggest export besides coffee had bought two small but irksome rivals to the Nordic vendors in the market for core network software.

The takeovers of Affirmed Networks and Metaswitch appeared to signal Microsoft’s ambitions in the telecom sector. Fortified by Microsoft’s money, the two companies threatened to be a lot more dangerous.

Taking the industry by surprise, the moves generated some awkwardness between Microsoft and the Nordic firms, both of which had been used to regarding the US software giant as more of a partner than a foe. This vision of Microsoft as a rival to traditional telecom vendors is one it has been subsequently trying to dispel.

“Ericsson and Nokia were very concerned, but at the end of the day what market share does Affirmed have?” said Rick Lievano, the chief technology officer of Microsoft’s telecom business, during an interview at the recent Digital Transformation World event in Copenhagen.

“We didn’t buy them because they have huge market share. We bought their expertise.”

Yet what Microsoft did next was an even bigger shock to the industry. In June 2021, AT&T announced plans to run its entire 5G network on Azure, the name given to Microsoft’s public cloud. As part of that arrangement, staff and assets would change hands, moving from AT&T to Microsoft.

Financial terms were not disclosed, and the deal was not even mentioned in AT&T’s annual filing with the US Securities and Exchange Commission. But Microsoft had effectively bought the control center of the AT&T network and the expertise needed to run it.

These separate but related moves laid the foundations for what Microsoft now calls Azure Operator Distributed Services (AODS). The goal, as described in a blog earlier this year, is to give operators a “carrier-grade” cloud platform where they can feasibly run most of their workloads, including their core, radio access network (RAN) functions and business and operational support systems.

Microsoft is now in discussions with several operators about this yet-to-launch commercial AODS offer. Ultimately, Lievano talks about capturing at least 60% of the overall telecom market for public cloud services.

Different strokes

It is a markedly different strategy from the one AWS is pursuing, insists Lievano.

The world’s largest public cloud has been far more visible in the telecom sector globally, signing up numerous operators as tenants and dozens of software companies as partners.

Dish Network, its flagship customer, has opted to run nearly all its workloads on AWS. Just last week, Japan’s Rakuten revealed that its Symware app store of network goodies would become available through AWS, without even acknowledging the existence of Azure or Google Cloud, the distant number three.

“They have chosen to learn with their customer projects,” said Lievano.

“AWS is going to learn a lot from Dish. Dish is going to pay a lot for AWS learning their business. We made a conscious decision not to do that. We are not going to charge customers for learning and becoming telco experts. We are ultimately going to acquire the right level of expertise.”

That is necessary, according to Lievano, because the telecom sector cannot be treated like retail or hospitality.

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