Microsoft Acquisition of Affirmed Networks: Threats, Opportunities and Disruption in the Race to 5G

Paul Gainham

When an industry titan such as Microsoft makes its first significant move into the networking space, some 45 years after it was founded, it inevitably makes you sit back and ask why, and why now?

What does the king of the desktop OS and apps, as well as a major public cloud player, see in 5G? What convinced it to emerge from decades of networking indifference and make the significant move of acquiring a virtualized packet core vendor?

Maybe, it’s because they DO have such an important position in the desktop OS and application space. Possibly, it’s due to their Azure public cloud offering, or perhaps because of their substantial stake in enterprise IT that they saw a need and an opportunity to act.

This leads one to wonder if this is a defensive or expansive move on their part. Is Microsoft looking at purely the enterprise market, or does the consumer market hold an attraction for them from a 5G perspective?

So many questions, but one thing is for certain — their timing is interesting. Recent moves by their competitive peers have seen HPE enter the 5G core space with their 5G Core Stack as a service offering. Google recently announced a combined Anthos/mobile edge computing solution with heavy positioning around the 5G edge opportunity and Amazon released their Wavelength edge computing offering as an extension of its VPC offering in late 2019.

When added to key developments in the access space such as OpenRan, there are a series of technology and vendor disruptions occurring early in the 5G cycle. These disruptions will delineate a new supply chain and ecosystem and could “disturb the force” of the existing network equipment suppliers and telco business models.

Put another way, that’s at least five major announcements and developments centered around 5G in the last 12 months, none of which came from the established networking vendor community.

So, back to Microsoft. In entering the virtualized packet core space, Microsoft has, in my opinion, leapfrogged their peer competition by not only entering into the network control plane but tying that to their Azure public cloud offering. The global, distributed and virtualized nature of Azure, and the fact Microsoft has commercial relationships with thousands of enterprises across the globe based on that platform, is their secret sauce in developing new 5G opportunities.

Those opportunities likely span three key areas.

A Global 5G Private Network as a Service Offering to Enterprise

With the global coverage of Azure, the virtualized nature of the Affirmed Networks product, the availability of private 5G licensed spectrum and growing interest in private networking, Microsoft could deliver a combined desktop OS, application suite, 5G core and cloud offering as part of an integrated solution to larger enterprises. The Microsoft brand is already well established in those organizations and this gives them the opportunity to expand as part of a 5G enterprise play. These deals would still likely be fronted by system integrators, who would take point responsibility for the onsite delivery of the networking components, such as RAN and backhaul, as well as the deployment of mobile, desktop and IoT devices. Microsoft would become an even more important and “sticky” part of that integrated solution. The 5G packet core is both an expensive and complex asset to implement and run. Removing that barrier to private network deployments and exercising the significant economies of scale from a global “as a service” deployment model makes this compelling.

For system integrators, the key benefit is that one-stop 5G shop wherever enterprises show up around the world, delivering consistency in integration. On the other hand, the consistency of delivery, uniformity of use cases and ability to take full advantage of 5G across its workplace, industrial and IoT potential, is the key benefit to the end enterprise.

The enterprise serving arms of telcos could well be most at risk from this move. They could be value-delineated in architectures such as this and relegated to transport providers (as has mostly happened in the IoT space). As always, market disruptions occur when a perceived gap exists in the way markets are served. Those enterprise divisions will need to rapidly embrace the extended value delivery capability of 5G to avoid that threat of disruption.

The Telco in a Box

Two possible derivatives exist. In an attempt to drive down operational costs, some small to medium MNOs may find an outsourced 5G core model appealing. The 5G core does become a complex asset to implement and run. The fact Microsoft could offer this potentially anywhere that their Azure network shows up (either in its datacenter or edge compute form) would get around any performance/latency concerns.

The second derivative is around neutral host networks. Smart space owners of airports, ports, sports arenas and shopping malls could see the opportunity in 5G to offer their own network-centric offerings around enriched consumer experiences, IoT, B2B2X models, etc. In doing so, their goal is not to become an MNO, but to work with existing MNOs to deliver better indoor coverage and possibly geo-location driven offers into those MNO brands. Third-party service providers making this kind of service available to smart space owners may well view a Microsoft 5G core “as-a-service” solution combined with the ability to inject rich application and business model offerings as compelling.

A Global MVNE Offering

While it’s unlikely that Microsoft would enter a direct consumer mobile offering (either in 4G or 5G), the increasing deployment of 5G new radio across the globe and Azure’s global presence could make an MVNE (Mobile Virtual Network Enabler) offering attractive to them. This would be driven by the effective wholesaling of the virtualized 4G/5G control plane at their disposal, plus their ability to offer an array of supporting consumer cloud solutions to counter similar offerings from Apple and Google. Microsoft’s negotiation clout at the front-end with incumbent MNOs could make for compelling upstream economics for MVNOs looking to focus more on their “servco” role and the associated branding and marketing of offers. The further attraction of joint branding with Microsoft around key consumer applications, such as online gaming, could further expand the interest here. Specialist MVNOs looking to deploy large multi-geography, roaming IoT type deployments may also look positively on these types of offerings.

The possible threat to existing consumer-focused MNOs lies in the power of a “powered by Microsoft” MVNO type offering based on strong economics and solutions that go beyond simple connectivity. The arrival of 5G and its expansive opportunity potential driving a whole new era of digital commerce and new business models is one that MNOs need to be tuned to and proactive in early in the cycle.

Under Satya Nadella, Microsoft has been incredibly successful at reinventing themselves for the cloud era. Their first significant move into networking in their 45-year history, timed with the early deployments of 5G, sends both a gesture of their intent as well as a further blurring of the lines between IT and networking. When taken in the context of the other announcements outlined earlier, it also potentially signals a combined, seismic disruption to established supply and business model chains

The race to 5G just became even more intriguing.

Pin It on Pinterest

Share This