Deutsche Telekom and Microsoft ink seven-year cloud deal

German operator Deutsche Telekom is positioning itself as the preferred on-ramp to Microsoft cloud services for medium and large enterprises.

To that end, this week it announced it has expanded its strategic partnership with the US software giant.

“We have agreed on the framework for joint strategic growth with our long-term partner Microsoft. We are delighted,” said Adel Al-Saleh, CEO of Deutsche Telekom’s T-Systems unit, in a statement on Thursday. “This partnership will enable us to enhance services for our customers. We will also be supporting each other with digitalisation and network build-out.”

The seven-year deal that brings together Microsoft’s cloud and AI capabilities and Deutsche Telekom’s carrier grade networks and services – including its cloud migration framework. The agreement will also see Deutsche Telekom adopt Microsoft Azure as part of its ongoing strategy to migrate the majority of its internal IT workloads to the public cloud by 2025.

To show off just what their partnership can achieve, the two companies have launched a project to equip schools in Germany with the infrastructure and applications they need to facilitate remote learning. It includes Microsoft’s suite of collaboration and productivity apps.

It is a boon for Deutsche Telekom’s IT arm, T-Systems, because closer integration will enable it to offer enterprises a premium Azure experience, enabling it to play an important role in the ecosystem. Meanwhile, Microsoft’s cloud business gets the benefit of Deutsche Telekom’s enterprise sales channel – helping it to compete with the likes of Amazon Web Services. It also represents a significant customer win.

“Through this strategic partnership, which combines the power of Deutsche Telekom’s network and Microsoft’s cloud, customers will have more opportunities to become resilient, accelerate innovation and ultimately drive success,” said Jean-Philippe Courtois, EVP and president, Microsoft global sales, marketing and operations.

It puts both companies in a stronger position to capitalise on the expected surge in spending on digital transformation (DX).

As Telecoms.com reported earlier this week, according to IDC, global spending on DX between 2020 and 2023 is on track to total $6.8 trillion. Unsurprisingly, IDC cites coronavirus as the principle driver.

T-Systems could do with some good news. In its third quarter results, Deutsche Telekom reported that revenue at the division was down nearly 5 percent on last year, as the pandemic led to a contraction in spending on traditional IT services, as customers’ projects were put on hold and staff worked from home. Its troubles led Deutsche Telekom to record a non-cash impairment charge of €500 million.

Like many traditional IT players, T-Systems hopes growing demand for digital transformation services – which of course includes cloud migration – will eventually more than offset the weakness in the legacy side of the business.