Microsoft and AT&T Team Up for Cloud, AI and 5G

Growing collaboration between operators and cloud providers

On Wednesday, Microsoft and AT&T announced a multi-year strategic alliance that sees both companies step up their efforts in cloud, artificial intelligence (AI) and 5G technologies. The deal is reputed to be worth over $2 billion, according to Reuters.

AT&T has nominated Microsoft Azure as its preferred cloud for non-network related applications and will use Microsoft 365 for office productivity for much of its 180,000-strong workforce. Although details are unclear, the carrier is in effect focussing on its core network-based applications, many of which run on-premises, and opting to move most of its other systems to the Microsoft cloud.

It’s a big win for Microsoft, especially against competitors Amazon Web Services and Google Cloud. The Redmond company is currently the world’s most valuable publicly traded company with a market capitalization of just over $1 trillion. In the past year, it has signed up several companies in high-profile vertical markets such as retail, winning over names including Gap, Kroger, Walgreens and Walmart. It underscores how Microsoft can use its position in workplace software-as-a-service applications to give it the edge over rivals in cloud infrastructure services, especially with customers concerned by the perceived competitive threat that Amazon and Google pose to their business.

However, the deal is non-exclusive, and AT&T can use other cloud providers as part of its transformation. The carrier announced on Tuesday a deal that seeks to build on the networking relationship between its AT&T Business division and IBM, and to work with Red Hat to modernize its internal legacy applications and migrate its software to its hybrid cloud infrastructure.

AT&T was among the first wireless carriers in the world to switch on a 5G network, in the US, and expects to have nationwide coverage by the first half of 2020. It’s also among the most advanced carriers in network transformation, with a target of virtualizing 75% of its core network operations by 2020.

The carrier expects huge growth in mobile data in the coming years from the platform that will be supported by Azure and other Microsoft technologies. One of the most important aspects of the partnership is that the two companies will work on bringing 5G connectivity to edge computing devices and AI services building on their efforts to test an edge computing-based tracking and detection system for drones. They plan to announce additional services in these areas later in 2019.

This is a powerful combination that leaves much to the imagination in terms of its potential. AT&T, through the ownership of Time Warner, has a wealth of media assets that will prove attractive for 5G applications using mobile edge computing and building on the virtualization of its core network. Microsoft has a wide portfolio of gaming, hybrid cloud and edge computing assets, as well as AI services and Internet of things solutions. The duo could deliver powerful 5G-based solutions to industries combining many of these capabilities for consumers and businesses, spanning streaming content, real-time advertising and gaming, field service and first-responder solutions.

On the heels of a joint initiative by IBM and Vodafone earlier in 2019, the alliance between Microsoft and AT&T validates a prediction we made at our Predictions event in 2018. We argued that as 5G matures with the advent of standalone 5G, virtualization of core and radio access networks, improved coverage, low latency and dedicated quality of service through network slicing, cloud service providers and mobile operators would collaborate to put commercial clouds at the network edge.

We’re pleased this prediction is already taking shape. But most of all, we’re looking forward to seeing more of these fascinating partnerships appear as 5G takes hold in the coming years.