Vodafone today announced it will spend $1.5 billion on Microsoft services in a move to boost the carrier’s leadership in generative artificial intelligence (genAI) and IoT across Europe and Africa. The 10-year partnership will see Vodafone migrate 46,000 servers from on-premises data centers to Microsoft Azure and the hyperscaler’s use of Vodafone’s fixed and mobile connectivity services.

Using the Microsoft Azure OpenAI service, Vodafone aims to provide a personalized and differentiated customer experience by improving its digital assistant chatbot TOBi. Vodafone will also integrate Microsoft Copilot into the employee experience to improve productivity and digital efficiency.

“This new generation of AI will unlock massive new opportunities for every organization and every industry around the world,” Microsoft CEO Satya Nadella said.

The companies will also work together to scale Vodafone’s IoT platform, which currently connects 175 million devices, vehicles and machines globally. Microsoft will invest an unspecified amount in this pursuit with the aim of spinning off these IoT services as a standalone business by April 2024.

In tandem, Vodafone and its IoT platform will become part of the Microsoft Azure ecosystem, pushing the platform’s availability to the hyperscaler’s developer and third-party communities. The two partners expect the spinoff company will attract new clients and partners and improve global adoption of Vodafone’s IoT platform.

The third main aspect of this deal is cloud transformation. Vodafone will move workloads and data from nearly 50,000 on-premises servers to Microsoft’s public cloud. This migration will improve Vodafone’s responsiveness and reduce operational costs associated with its IT infrastructure, according to the companies.

Luc Vidal, who leads IoT business and mobility at international connectivity provider BICS, told SDxCentral the Vodafone-Microsoft partnership accurately represents the current level of sustained growth in IoT services.

But more importantly, the deal “will likely only fuel increased attention in 'connectivity twins,'” which he describes as “the missing piece” needed for enterprises to virtually clone IoT devices for a real-time view of their IoT devices and application components.

“Digital twins turn device-centric information into a business visualization, allowing more efficient decisions,” Vidal said.

And as IoT devices continue to grow in number, connectivity twins will prove necessary for enterprises to improve troubleshooting, predict downtime and maintenance predictions and enhance overall service quality. “Without these, businesses deploying IoT will effectively be blind; lacking real control over their systems and devices,” Vidal said.

According to a Vodafone spokesperson, the breadth of this deal is what drove the company’s decision to work with Microsoft. In addition to the deal’s first three pillars, Microsoft and Vodafone are also working to accelerate digital transformation in Africa and spread adoption of Microsoft’s enterprise services.

“This unique strategic partnership with Microsoft will accelerate the digital transformation of our business customers, particularly small and medium-sized companies, and step up the quality of customer experience for consumers,” Vodafone Group CEO Margherita Della Valle said.

In Africa, Microsoft will help Vodafone scale M-Pesa – one of the continent’s leading financial technology platforms – by migrating it to Microsoft’s cloud and opening the door to the integration of new, cloud-native applications.

The two companies are also launching a “purpose-led” program aimed at “enrich[ing] the lives” of 100 million consumers and 1 million small- to mid-sized enterprises in Africa. The program’s goal is to build digital literacy, skills training and youth outreach programs, along with boosting innovation for the region’s financial services and fostering a community of developers.

The deal’s final pillar includes Vodafone extending a commitment to distribute Microsoft services as part of the hyperscaler’s goal to become Europe’s leading provider of business platforms. The commitment includes Microsoft Azure, security services and Teams, among others.