Microsoft Azure EVP Jason Zander said Microsoft’s work with telecom operators is “part of the core strategy” for Azure, noting in an investor call that Microsoft has been “doing a lot of work around some of the telco communications operator space.”
His comments echoed those made by Microsoft CEO Satya Nadella on the company’s most recent earnings call. In describing Azure’s vertical industry momentum, Nadella led with Deutsche Telekom, which is working with Microsoft to modernize its IT infrastructure by moving workloads to the Azure cloud.
Microsoft demonstrated its determination to become part of the telecom ecosystem through its 2020 purchases of Affirmed, a network virtualization specialist, and telecom software developer Metaswitch, followed by its launch of Azure for Operators, which combines virtual network functions from many different providers in the Azure environment.
Azure for Operators is a play to get network operators to move workloads to the cloud, but Zander said on the call that Microsoft recognizes the value of the “hybrid” cloud architecture. “You're going to have on premises and edge, and you're going to have the public cloud. You want a combination of both. I think that's actually been cemented,” he said.
Microsoft’s telco play has prompted some analysts to speculate that the software giant could steadily co-opt more and more core network functions, leaving its telco partners to focus on the access networks and the end users. Zander has said that he expects operators to take various approaches to Azure, with some selecting a handful of the virtual network functions Azure offers and others opting for an end-to-end solution from the cloud provider. Zander’s primary goal with operators (and other customers) is to get them to migrate at least some of their workloads to the cloud.
“At the end of the day, I do think that the cloud is the big-picture win,” he said. “Getting folks onto the cloud is my high-order bit. Once I get within that, then, of course, I want to differentiate with my products, but let's get you on the cloud. And from a business perspective, that is a strategic win for us, and it opens up all sorts of other revenue opportunities.”
Microsoft has been getting a lot of businesses onto the cloud during the COVID-19 pandemic. The company said Azure grew revenue 50% year-on-year during the quarter ending in January 2021. Commercial cloud revenue rose 34% to $16.7 billion, and Microsoft added seven new data centers during the quarter.
On the recent investor call with Morgan Stanley, Zander estimated the total addressable market for Azure at $1 trillion. “My goal is to try and make sure that we are serving essentially the bulk of the world's GDP," he said.
Microsoft’s competitors in the hyperscale cloud market include Amazon and Google, and many telecom operators have chosen to work with more than one public cloud provider.
“It’s a very competitive environment,” admitted Zander. “That's good for customers out there.” He added that Azure has at least two competitive advantages: its hybrid cloud approach, and its longstanding relationships with companies all over the world that have been doing business for years with Microsoft. "That does count,” said Zander. “So that trust also in delivery, that trust of the partnership that we've had for a long time also goes into some of the competitive evaluations.”