Vodafone signs a 10-year, $1.5B deal with Microsoft that sheds European DCs

AI for customers and staff, while Euro bitbarns shifted to Azure

Microsoft and Vodafone have inked a 10-year deal worth $1.5 billion, resulting in the telecommunication giant shuttering physical datacenters across Europe in favor of virtual ones using Azure.

Both companies emphasized the generative AI angle to the deal. Vodafone plans to use Azure OpenAI "to deliver frictionless, real-time, proactive and hyperpersonalized experiences across all Vodafone customer touchpoints." The company's employees will also get access to Microsoft Copilot.

However, replacing Vodafone's physical datacenters with virtual ones across Europe is the most notable aspect of the deal. Vodafone expects to be able to save money through the move, although the company was not clear how it would protect customer data.

Microsoft has taken steps to assuage the concerns of EU regulators through its EU Data Boundary initiative and recently announced that all personal data – including pseudonymized personal data – was now within the boundary. Over the last year, it added the ability to store and process customer data within the boundary for Microsoft 365, Azure, Power Platform, and Dynamics 365.

As well as replacing physical datacenters with Azure, Microsoft intends to invest in Vodafone's managed IoT connectivity platform, which will become a separate, standalone business by April 2024. The system connects 175 million devices and platforms worldwide and will become part of the Azure ecosystem.

Finally, Vodafone will also "extend its commitment" to pushing Microsoft's services – Teams Phone Mobile, etc – to biz customers. Microsoft says in a statement: "This enables business customers to deploy Microsoft's cloud-based services at pace with low adoption and running costs." According to Microsoft, an estimated 24 million SMEs across Europe could benefit.

Microsoft has a long history with telcos. In 2021, it signed a deal with US carrier AT&T to shift the telco's 5G mobile network to the Microsoft cloud. The deal resulted in Microsoft taking over the development of AT&T's Network Cloud.

The latest deal is interesting, and not just because of the sum of money involved. Rather than attempt to buy in an AI solution or make use of its in-house capabilities, Vodafone has, in the words of Megabuyte, "decided to effectively outsource AI to Microsoft."

However, with Microsoft's cloud activities coming under increasing scrutiny, both from the UK's CMA and EU authorities, issues of data sovereignty could potentially attract the attention of regulators.

Vodafone told The Register: "This is about moving tens of thousands of servers from our on-prem data centres to the cloud. This is a multi-year programme. Our core network workloads stay on-prem.

"Customer data is only stored in Europe and there are robust controls in place to prevent any cloud provider, including Microsoft, from accessing the data. Vodafone policy ensures that the appropriate encryption is applied to sensitive data." ®

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