Telstra deepens Microsoft partnership

Telstra is continuing its mission to become an IT company by extending its partnership with Microsoft to deliver the software giant’s Office 365 productivity suite.

Telstra already offers managed services for Office 365 through a long-standing hosting agreement with Microsoft that has evolved since 2011.

However, the new agreement will see the carrier offer Office 365’s full set of capabilities including cloud productivity and collaboration apps, video conferencing and meeting broadcast capabilities, and Telstra’s cloud-based enterprise voice calling.

Microsoft’s head of partners Giovanni Mezgec said the deal represented a phase of deeper collaboration between the two companies on new cloud products, which could culminate in the pair collaborating "to co-develop solutions unique to the Australian market".

Telstra’s global applications director Gianpaolo Carraro said Telstra’s recent acquisitions of Microsoft Azure managed services specialist Kloud and rival cloud consultancy specialist Readify would allow it “do some magic” in Australia.

The hosting relationship between Telstra and Microsoft extends back as far as 2009 when Office 365 became the basis for the carrier’s cloud-based T-Suite productivity applications for small businesses.

It moved into a higher gear in 2011 when the two companies signed a deal that gave Telstra exclusive rights to resell Office 365 products in Australia.

At the time Office 365 was Microsoft's answer to Google's rapidly growing Google Apps online email, calendar and collaboration services, and Telstra was quietly pouring $800 million in capex into cloud computing through its network application services division.

Microsoft has also been investing heavily in its Azure cloud platform from data centre facilities around the world as it tries to keep up with the shift from PC-centric computing to tablets and smartphones.

Announcing the partnership with Telstra, Mezgec said Office 365 had gathered 70 million users worldwide including a million in Australia. He also pointed to recent figures by analyst firm Gartner indicating that it was being used by 80 percent of companies with revenue in excess of US$10 billion.

However, it’s not clear what proportion of those are simply migrating from PC-based Outlook to Office 365 rather than taking up more sophisticated services.

Microsoft’s controversial former chief executive, Steve Ballmer, who led the company through the most painful era of the PC decline, has been one of its most outspoken critics in years, accusing the company of being opaque about its cloud revenue.

Late last year Ballmer called on the company to change the way it reported its cloud revenue, which was at the time reported on a “run-rate” basis — meaning that it would report sales at a particular point in time and aggregate that to a yearly figure with a target of US$20 billion by 2018.

However, at the time it was reported that Microsoft was convincing customers to bundle cloud services into sweeping enterprise software contracts at a discounted rate so they could be reported as part of its cloud revenue figures.