Microsoft Brings the Power of IT into Telecoms

Microsoft’s Information Technology (IT) capabilities are wide-ranging. According to Microsoft, its Azure infrastructure is available in 62 regions worldwide. It has an extensive backbone network that consists of 170 Points of Presence (PoPs), 130,000 miles of fiber optics and undersea cabling, and approximately 2,000 peering connections. Microsoft claims that its interconnect capabilities sit within 25 miles of 85% of the world’s Gross Domestic Product (GDP). Further, Microsoft asserts that more than 200 Communications Service Providers (CSPs) leverage its backbone network to connect to Azure. Microsoft, with its acquisitions of Affirmed Networks and Metaswitch, is aiming to leverage the cloud and 5G to unlock new revenue streams, create shareholder value, and disrupt the economics of providing services.

Microsoft’s acquisitions equip it with the telco capabilities required to drive implementations of public cloud in CSPs’ edge environments and to use the carrier-grade capabilities of both acquisitions to interface with existing enterprise communication networks. The combination of Azure and 5G low latency enables CSPs to drive digital transformation, consolidate and automate processes and operations, and create transformative experiences for consumers and enterprises.

CSPs can also future proof networks by driving down costs as they deploy containerized network functions as a service on hyperscale clouds. Given the economies of scale, agility, resource abstraction, and network element connection that the public cloud supports, CSPs can operate hybrid networks in a seamless fashion and monetize new business models. That journey is what Microsoft calls the “three horizons.”

Microsoft views the adoption of cloud-based technologies in telcos as a three-pronged approach, and consequently, maps its technology roadmap and investments across three horizons. Horizon one, or software-enabled services, starts with the virtualization journey and brings cloud compute power to the CSP edge. For example, Microsoft claims that it already has 115 customers leveraging virtualized packet core implementations and more than 400 virtualized voice customers. The goal with software-enabled services is to enable CSPs to unlock operational cost savings via automation and open up new sources of revenue at the enterprise edge. To that end, Microsoft, like other key cloud providers, has announced more than a dozen edge computing partnerships with CSP partners as discussed in ABI Insight (IN-5884) “Telcos versus Hyperscalers in the Race for 5G Edge Computing.”

With horizon 2 (cloud-based functions), Microsoft introduces containerized Network Functions (NFs) in its Azure platform. This bodes well for the fast-evolving Open Radio Access Network (RAN) architecture. In contrast to core networks, which are hosted in CSPs’ Data Centers (DCs), the RAN domain has a smaller physical footprint. There is limited room for a hard disk, Central Processing Unit (CPU) power, and memory to support RAN elements. For instance, running OpenStack, or multiple operating systems, may not be feasible due to a sizeable compute footprint. With its investments to build carrier-grade support into Azure, Microsoft accelerates the deployment of disaggregated radio elements. This bolsters Open RAN ecosystem maturity and paves the way for Azure capabilities to be co-located with RAN functions in the same edge DCs.

Lastly, horizon 3 (cloud-enabled services) centers around new services enabled by the cloud. Operators’ network edge becomes more dynamic and scalable as application workloads move wholesale into the public cloud. For example, CSPs can move the user plane closer to customer sites to drive service deployment flexibility with cloud agility. Enabling flexible service deployment sits at the foundation of Microsoft’s Azure for Operators strategy. CSPs continue to own the customer relationships, while they capitalize on Azure’s agility to monetize their networks in novel ways that enable them to differentiate.

Tier One CSPs are already engaging with hyperscalers to migrate DC and IT workloads to public clouds. Additionally, CSPs are collaborating with public cloud providers for edge deployments and edge use cases. CSPs enjoy physical presence in distributed edge DCs. They are seeking to leverage public cloud capacity in those edge sites and leverage cellular networks at the back end. This will almost certainly lay the foundation for building cloud-based Platform-as-a-Service (PaaS) solutions. To that end, Microsoft has already announced several engagements with CSPs, including AT&T, Telstra, Telefónica, and Etisalat. These will enable operators to benefit from fusing edge clouds with low-latency 5G connectivity.

ABI Research expects these collaborations to proliferate as CSPs adopt edge computing, 5G core and Open Ran technologies to drive growth with a better execution of current use cases, create entirely new use cases, and institute new business models based on public cloud economics akin to those exhibited by hyperscalers.  There is a shift in the telco value chain that results from the Internet and the cloud enabling zero distribution and zero transactional costs. The fundamental nature of public cloud software is abundance. The critical competence is the ability to provide a superior experience and/or to solve specific business problems. Rakuten’s decision to rename its Network Operations Center (NOC) as a Service Experience Center (SEC) further drives that point home.

The public cloud offers agility and the ability to drive innovation based on software-driven platforms. CSPs must realize that the new world in cellular must start with a foundation on software and Application Programming Interface (API)-led connectivity. Further, the continued convergence of cloud compute and cellular may well mean that, in addition to bolting on software capabilities, CSPs need to learn how to build them.