Microsoft, Affirmed and Metaswitch: What does it mean for telecoms?

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Microsoft’s telecom timeline

The last couple of years has seen Microsoft and Azure increasing their involvement in telecoms infrastructure and software while building partnerships with telcos around the world. This march into telecoms stepped up a level with Microsoft’s acquisition in 2020 of two independent virtual network function (VNF) vendors with a strong presence in the mobile core, among other things: Affirmed Networks and Metaswitch. Microsoft was not previously known for its strength in telco network software, and particularly the mobile domain – prompting the question: what exactly was it doing in telecoms?

The graphic below illustrates some of the key milestones in Microsoft’s steady march into telecoms.

Microsoft’s move on telecoms

Microsoft’s five partnership and service models

Microsoft Azure’s key initiatives over the past two years have been to expand its involvement in telecoms, culminating in Microsoft’s acquisition of Affirmed and Metaswitch, and the launch of the Azure for Operators portfolio.

As a result of these initiatives, we believe there are five models of partnership and service delivery that Microsoft is now proposing to operators, addressing the opportunities arising from a convergence of network, cloud and compute. Altogether, these five models are:

Five business models for partnerships

• A classic telco-vendorrelationship (e.g. with Affirmed or Metaswitch) – helping telcos to evolve their own cloud-native network functions (CNFs), and cloud infrastructure and operations
• The delivery and management of VNFs and CNFs as a cloud service, or ‘Network Functions-as-a-Service’ (NFaaS)
• Enabling operators to pursue a hybrid-cloud operating model supporting the delivery of their own vertical-specific and enterprise applications and services, or Platform-as-a-Service (PaaS)
• Rolling out Azure edge-cloud data centres into telco and enterprise edge locations to serve as a cloud delivery platform for third-party application developers providing low latency-dependent and high-bandwidth services, or ‘Network-as-a-Cloud Platform’ (NaaCP)
• Using such Azure edge clouds – in enterprise and neutral facilities alongside telco edge locations – as the platform for full-fledged ‘net compute’ services, whether these are developed collaboratively with operators or not.

Table of Contents

• Executive Summary
  • Microsoft wants to be a win-win partner
  • What should telcos and others do?
  • Next steps
• Introduction
  • What is Microsoft doing, and should telcos be worried?
• What has Microsoft done?
  • Microsoft’s telecom timeline
• What is Microsoft’s strategy?
  • Microsoft’s five partnership and service models
  • The ‘Azure for Operators’ portfolio completes the set
  • 5G, cloud-native and net compute: Microsoft places itself at the heart of telco industry transformation
  • Cellular connectivity – particularly 5G – is pivotal
• Telco-hyperscaler business models: What should telcos do?
  • Different hyperscalers have different telco strategies: comparison between Azure, AWS and Google Cloud
  • What should telcos do? Compete, consume or collaborate?
• Microsoft’s ecosystem partnership model: What counts as success for telcos?
  • More important to grow the ecosystem than share of the value chain
  • Real-world examples: AT&T versus Verizon
• Conclusion: Telcos should stay in the net compute game – and Microsoft wants be a partner
• Appendix 1: Analysis of milestones of Microsoft’s journey into telecoms
• Appendix 2: Opportunities and risks of different types of telco-hyperscaler partnership
• Index

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