- Alianza struck a deal to acquire nearly all of Metaswitch’s assets from Microsoft, except for its packet core Nexus products
- CEO Brian Beutler told Fierce Alianza is angling for a leadership position in the service provider core and telco cloud migration segments
- IDC’s John Byrne said “Alianza appears to be heading where the puck is headed” when it comes to cloud migration
Where there’s smoke there’s fire, or at least that proved to be true of rumors that Microsoft was looking to get rid of the Metaswitch business it bought back in 2020. The surprising part? That fire has actually been burning for years, Alianza CEO Brian Beutler told Fierce in an exclusive interview.
Alianza is set to acquire Metaswitch from Microsoft for an undisclosed sum in a transaction expected to close in Q1 2025. Beutler said the deal includes all of Metaswitch’s legacy products, as well as the new ones developed at Microsoft except for the Nexus portfolio.
That last bit is important because Operator Nexus is the product that Microsoft uses to run AT&T’s mobile network core. Microsoft will continue to support its packet core products.
Shawn Hakl, VP of Product Management at Microsoft, told Fierce that telecom remains a “priority industry” for the company. He added the divestiture will allow “Microsoft to focus on its strengths in platform and AI, empowering telecom operators to modernize and monetize their networks, deliver superior customer services, and accelerate innovation through its secure AI platform.”
Beutler noted the deal covers Metaswitch’s intellectual property portfolio of 400+ patents as well as its entire team of 300 staffers. The addition will raise Alianza’s headcount to more than 650 people, and it’s planning to hire an additional 50 employees, he said.
The transaction will also drastically increase Alianza’s customer count from around 200 service providers today to around 1,000 post close. It is that scale, along with Metaswitch’s product lineup, that will help Alianza transform the service provider core market, Beutler told Fierce.
“This deal is about changing the market in a very big way that telcos absolutely need it today because the vendor ecosystem that existed 10 years ago is no longer supporting service providers,” he said.
The CEO continued: “There is no leader today when it comes to service provider core. Microsoft, Cisco, Genband own the market share but they do not have innovation. Then there are folks like Alianza that are innovative but subscale…combining the size and customer base of Metaswitch with the innovation of Alianza we think creates a new category here and a new market leader that can really help bridge this gap from legacy telco land to modern cloud services.”
Long time coming
Though rumors of a Metaswitch sale began circulating earlier this year, Beutler said the deal has actually been in the works for “a couple years.”
According to the CEO, Alianza had a “conviction” that Microsoft wasn’t fully utilizing Metaswitch’s assets in a way that benefitted service providers and made an unsolicited inbound offer a while back. So when Microsoft finally decided to get out of the network functions business, Alianza was stoked to pursue a deal.
Indeed, IDC Research VP John Byrne told Fierce that Metaswitch was a bad fit for Microsoft – it just took a while for them to realize it.
“The assumption was that hyperscalers and network products were a natural fit; however, telco is a tricky business with pretty low revenue and margins so the fit isn’t as clear as it seemed,” Byrne explained. “As Microsoft looked into the actual challenges of making the R&D investment required to entice a lot of loyal Metaswitch customers to help embrace cloud-native applications, it quickly concluded that it had other investment priorities that were closer to its own internal DNA and had a much larger addressable market.”
Asked whether Alianza also considered Affirmed Networks, which Microsoft bought the same year as Metaswitch when it wanted to make a serious go at the service provider market, Beutler said the company considered it. However, Affirmed’s business was “not close enough to our core strategy and not far enough along to get us really comfortable with it.”
Microsoft did not directly respond to questions about what it plans to do with Affirmed Networks going forward.
Analyst take
Beutler said the tie up with Metaswitch will make legacy to cloud migrations that much easier for telcos because once the deal closes Alianza will control both the donating legacy platform and the new landing zone in the cloud.
He added it also plans to roll back some Metaswitch’s end-of-life announcements that were made earlier in 2024 to give operators some breathing room.
Byrne told Fierce that Alianza has flown under the radar for most of its life but has spent that time quietly amassing market share as CSPs began seeking cloud migration paths. Now it’s poised to grab an even larger share of the market. Why?
“As more operators embrace cloud-native architectures, the market appears to be coming in its direction,” he explained. “As we think about ‘AI-native’ architectures as the basis of future architectures, Alianza appears to be heading where the puck is headed.”
He added that the addition of Metaswitch to its business “provides strong communications R&D, a loyal customer base with minimal overlap, and a solid innovation path. Alianza can now lean more into its value proposition of unifying the platform in order to help telco build the great user experience.”