Microsoft is cozying up to the telecoms industry as part of its strategy to enter the cloud computing space. While its products are already common place inside telco organisations, Microsoft is now eyeing the telecoms sector as more than simply customers of its software, but also as partners as it promotes its cloud-based platforms, according to Microsoft general manager, communications sector for Asia Pacific, greater China, India and Japan, Geoff Thomas.

Just this month, Microsoft announced three major partnership deals with Asian service providers to promote its cloud platforms. In Taiwan, Microsoft has signed a MoU with Chunghwa Telecom to offer a range of cloud services including Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). In India, Microsoft’s platform is now powering Reliance Communications’ cloud computing services while in Japan, the Internet Initiative of Japan (IIJ) announced that it will use Microsoft’s virtualisation technology, including Hyper-V, on its cloud computing services.

These deals add to a September announcement by Microsoft and Australia’s Telstra to make Microsoft Online Services available on the Telstra T-Suite platform for businesses.

So how important is this sector for Microsoft? Important enough for Microsoft CEO Steve Ballmer actually flew out to Taiwan for the signing of the Chunghwa deal. “This business has always been very important for Microsoft, but for many years, it was about driving internal efficiency in the telcos. We spoke about them as a customer. Now, it is very much talking to them as our partner,” Thomas told CommsDay International. “Now nearly all the conversations with telcos are about partnering – how can we go to market together, how can we differentiate ourselves, how do we combine our assets to bring new services to market. That is really how we have evolved.”

Effectively, Microsoft is turning to the telecoms industry as a channel to sell its cloud based platform and services – a situation that is a natural fit, according to Thomas.

“If you think about it, Microsoft has got a strong brand, and we’ve got a very broad portfolio of software and assets. We can help with marketing and launch joint go-to-markets. The service provider – they’ve got massive reach, they’ve got tremendous customer relationships, from consumers to businesses and enterprises, they own the billing relationship and they own the customer care relationship. Then they’ve got the local market knowledge and local executive,” he said. “Our proposition is, if you combine the assets of Microsoft with the assets of the service provider, it becomes a pretty compelling proposition for our joint customers, and our customers’ customers.”

DEPLOYMENT OPTIONS: As part of the strategy, Microsoft is not only bringing to the table its software, but also its investments in infrastructure and services. Telcos can choose to commit to the level of investments they make, as “Now nearly all the conversations with telcos are about partnering – how can we go to market together, how can we differentiate ourselves, how do we combine our assets to bring new services to market.” - Microsoft’s Thomas well as the types of services they want to offer.

Microsoft, according to Thomas, will offer telcos a full selection of deployment options, ranging from white labelled services hosted inside Microsoft data centres, to services hosted and managed by the telco’s own infrastructure.

“With these partnerships, they take different forms. Some of it is SaaS and that involves working with them to host Microsoft products and services – whether they host that themselves or it is hosted in a data centre operated by Microsoft,” Thomas said. “Another way we work with them is around the platform and the infrastructure that enables that environment through technologies like virtualisation. Microsoft has invested and will continue to invest in data centres, and we’ll continue to enable partner hosting as well – we will continue to offer that choice. They can also use a third party hosting providers.”

So far, telcos are warming to Microsoft’s message, Thomas said, adding that there’s been a lot of interest in Microsoft’s cloud computing offering, Windows Azure.

“We think there’s a shift going on in the industry. Some of the things that the telcos tell us, they are looking to transform more than ever – it is a highly competitive environment; they are looking to differentiate; they need value added services. They’ve got new demands from customers that they are trying to deal with. So they are looking to generate new revenue streams, and also they are looking to better leverage the long term assets, their infrastructure assets. They’ve got these massive assets that they are not fully leveraging today,” he added. “They are trying to drive up ARPU, they are trying to drive up subscriptions and really differentiating themselves. They are talking about different ways of bundling, (for example) SaaS with broadband. So really for them, it’s about cross-sell, up-sell, increasing their cash generation and metrics. That’s really the benefit – they take it and build their own unique offerings around it and really leverage their other services and offerings.”