AT&T signed an ‘8-digit’ deal that isn’t good news for VMware, Cisco or Huawei — but could be great for Google Cloud (VMW, CSCO, T)

AT&T is in the midst of an ambitious project called Airship, which could have sweeping implications for the $350 billion telecom equipment industry.

Late last week, AT&T signed an “8-figure,” three-year deal with a company called Mirantis. According to Mirantis, the company will help AT&T build out and manage the infrastructure it needs for its 5G network.

Airship means that if you want to build a cloud, specialized hardware and software from vendors like VMware, Cisco, Juniper and Huawei are unnecessary, Mirantis cofounder and CMO Boris Renski tells us.

AT&T’s Airship, which is open source software, will run in the telecom’s giant’s own data centers, running the software needed for core 5G functions like routing phone calls, or streaming and processing video, says Renski.

And a lot of telco companies are watching to see how it turns out.

“AT&T is the biggest, baddest, oldest telco out there,” says Renski. “For this refresh cycle, for the first time in telco history, they are choosing to not buy new [proprietary] boxes but, instead, use tech open sourced by Google to refresh their network for their 5G cycle. This will set the precedent in the industry.”

AT&T hopes that precedent extends far beyond telecommunications, Amy Wheelus, VP of Network Cloud & Infrastructure told Business Insider in an emailed statement.

There’s been “a lot of interest in Airship … and not just from telcos,” she said. AT&T expects other industries to use Airship for their own giant data center projects, too, from manufacturers to health care companies.

VMware is out

Airship is championed by AT&T, but the company doesn’t actually own or maintain it. It is run by the OpenStack Foundation, an industry group that’s also the keeper of several open source projects. AT&T is a member of the OpenStack Foundation, as are IBM and Comcast, among others.

Airship was launched last spring, spearheaded by AT&T, Intel and SK Telecom. But interest has been so high that Wheelus says it’s “on track” to “graduate” by next spring, meaning it will leave the OpenStack Foundation and come under the control of its own organization.

VMware CEO Pat Gelsinger
Yuya Shino/Reuters

Airship is stitching together several open source software technologies to make it easier for companies build, run and scale giant cloud computing projects, at the size of companies like AT&T.

Mirantis, AT&T and those involved with Airship will be making OpenStack, a data center operating system, work with another hugely popular, open source cloud technology called Kubernetes.

Kubernetes (sometimes known as “K8S”) is a software container management system. Software containers are a hugely popular technology for cloud apps that ensure the app works well no matter which cloud it lives on — whether it’s Amazon Web Services, Microsoft Azure, or anybody else’s. An increasing number of programmers use Kubernetes to manage all of their containers.

AT&T looked at offerings from VMware for this project and nixed the idea, AT&T’s Ryan Van Wyk, a cloud engineer executive, told Mitch Wagner of telecom news site Light Reading.

“There really isn’t much of an alternative,” Van Wyk told Light Reading. “Your alternative is VMware. We’ve done the assessments, and VMware doesn’t check boxes we need.”

Containers in general, and Kubernetes in particular, are generally considered an alternative to VMware’s flagship technology, known as virtualization. In recognition of the shifting tide, VMware in late 2018 bought a startup called Heptio. Heptio was founded by two of the three folks who created Kubernetes during their time at Google. This means that VMware also offers its own commercial Kubernetes product.

But because Google has made Kubernetes a a free and open source software project, Airship doesn’t need to buy a commercial Kubernetes product or service. It can make Kubernetes work with OpenStack, another open source project, without paying software license fees to anyone. That removes a major barrier to entry.

There are other losers

Because AT&T is using open source software as it upgrades its infrastructure to handle 5G, Airship will be able to run on lower-cost, commercially-available off-the-shelf hardware, known in industry speak as COTS.

Huawei Technologies CEO Ren Zhengfei
Dmitry Lovetsky

So where AT&T might typically spend big on new hardware to manage this change, it can save a ton by using more readily-available, cheaper products. That bodes poorly for the legacy data center hardware providers.

“Historically these [upgrade] cycles are an opportunity for the likes of Huawei, Cisco, Juniper etc. to sign big contracts and sell their big pre-integrated hardware boxes,” Mirantis’s Renski says.

And this isn’t the only high-profile attempt in the teleco industry to move toward less expensive hardware on free, open source software.

SK Telecom has also been involved in the Telecom Infra Project, originally spearheaded by Facebook, which is also creating open source telecom software and hardware. AT&T isn’t a member of TIP, although it is involved in the other Facebook-spawned hardware organization — the Open Compute Project, which is creating open source hardware for data centers.

And Wheelus tells us that that AT&T has embraced open source projects and has no plans to go back.

Open source, which allows all of the software’s users to build what they want and need together, helps AT&T “move away from the proprietary solutions that existed previously from specific vendors,” she said. “This allows us to keep costs low and move fast adopting cutting edge capabilities very quickly. Overall AT&T has committed over 10 million lines of code to open source communities – and no signs of slowing down.”

Google could be the big winner

So, if the traditional vendors are the being put on notice by upstart open source telecom projects like Airship and TIP, who is rubbing their hands in glee?

The answer: Google, at least when it comes to Airship.

“The biggest winner is Google because they are the fathers of Kubernetes,” says Renski.

Amy Wheelus, AT&T VP of Network Cloud & Infrastructure

Kubernetes was first developed by Google to be used internally on Google’s own massive data centers and apps. Google has since released it as open source, making it freely available to anyone. It’s since become so popular, all the major clouds have been forced to support it.

But because it was created by Google, Google’s cloud is still considered the best for Kubernetes-dependent apps. In fact, Google engineers are still the ones that contribute the most code to Kubernetes, according to tracking site Stackalytics.

To be sure, Google and its cloud are not directly involved in AT&T’s 5G project. AT&Ts use of Airship will run in AT&T’s own data centers, not on any cloud.

But as startups and existing vendors race to create 5G apps for telecom providers and users alike, they will host them in the cloud, more likely as not. And because Kubernetes is still a keystone accomplishment for Google, they could be more likely to turn to Google Cloud, over competitors like Amazon Web Services and Microsoft Azure.

The telecos are also the big winners, who believe they’ll be building the tech they need to make 5G a reality, while reducing costs.

“It has the potential to greatly change the way we think about deploying and managing software in the future,” AT&T’s Wheelus said.

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