AT&T CFO Stephens says IBM, Microsoft cloud deals a two-way street

AT&T's CFO says his company's cloud deals with Microsoft and IBM are key to cutting network costs and providing new services. (Getty Images)

While AT&T is on target for meeting its goal of having 75% of its network functions virtualized by next year, the next frontier is the cloud.

Speaking at Oppenheimer’s annual Technology, Internet & Communications Conference on Tuesday in Boston, AT&T CFO John Stephens outlined the benefits of AT&T's recent cloud deals with Microsoft and IBM.

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Virtualization has been a key cost cutter for AT&T over the past five years, but in order to continue down the cost efficiency path AT&T has set its sights on the cloud.

"The logical next step is to take those functions that we have left and put them into the cloud," Stephens said. "We've had some recent announcements with some very reputable partners, Microsoft and IBM, where we're taking that next step. It's a logical progression that we're doing and it will help us continue this cost efficiency."

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While Stephens also talked up the cloud cost efficiencies during last month's second quarter earnings call, the deals with Microsoft and IBM, which are reportedly worth billions, will earn additional revenue for AT&T. Stephens said the cloud enables new business use cases, such as storing doctors' records in the cloud for access anywhere.

Stephens said that while AT&T will provide the transport to the cloud, AT&T also benefits from being the go-to-market company for products and services from IBM and Microsoft.

"We feel good about that aspect of it," he said. "IBM is our partner on a lot of the business solution activities. Microsoft is really working with us on cloud activities for our core business operations, but we are working with many people on those kinds of solutions."

AT&T is also focused on deriving value out of the 170 million distribution points it has across video, wireless and broadband. With data from those endpoints in hand, Stephens said AT&T could infuse "knowledgeable decision" processes to help grow its advertising business.

Stephens said that AT&T was nearing the 60% level of automation on the network side with 75% as the initial target.

"Once we get to 75% I don't think it ends there," Stephens said. "That's just the target point we've picked that we're planning on getting to. We're going to do what we said we would do to get there but this is just going to be ongoing."

Outside of the network, AT&T is also working on lowering costs with automation across customer care, billing and provisioning, and product ordering, according to Stephens. 

"We've got a team that is doing just that from what I'll call the retail side," he said.  "We're automating and putting it into the cloud, and we expect that to continue."

In order to stay relevant with all of its customer bases, and lower costs, Stephens said AT&T is automating more products, services and applications in the cloud because that's where some customers want to shop.