John-Paul Hemingway.

SES’s relationship with Microsoft continues to deepen. Last year, the operator reached a deal with Microsoft to become an ExpressRoute partner and to offer cloud-enabled video playout services. Now, SES is becoming the Medium-Earth Orbit (MEO) connectivity partner for Microsoft Azure Orbital, Microsoft’s new managed service enabling network operators to communicate and control their satellite capacity, process data, and scale their operations within Azure. The integration is part of a multi-year agreement between the two companies. It aims to accelerate and expand SES’s use of Azure to significantly advance the digital transformation of the company’s services and operations as part of its cloud-first strategy. 

Via Satellite caught up with JP Hemingway, SES Networks’ CEO to talk about the significance of this latest deal and how it will translate into increased revenue for SES. Hemingway said this partnership is about being a part of its customers’ digital transformations with optimized cloud and cloud connectivity solutions, and he revealed SES is currently conducting trials with customers to demonstrate how seamless cloud and connectivity solution work in practice.

VIA SATELLITE: SES’s deal with Microsoft was one of the pioneering deals of 2019. What are the major differences between the deal announced at IBC last year, and this new deal with Microsoft?

Hemingway: Back in September last year, we announced our agreement with Microsoft, and we had said that was the start of something, so the announcement this year isn’t really a new deal. This is an evolution of a partnership that would be reaching across our business and includes multiple dimensions of service co-creation and digital transformation with Microsoft. 

In 2019, there were two aspects to it, one was becoming an ExpressRoute partner, which is about secure, high-performance connections extended with incredible reach over our satellite fleet, providing our customers with access to cloud applications and more market reach for Microsoft. Secondly, we had this aspect around broadcast grade, cloud-enabled playout services to give video customers more flexibility and control. They are both progressing well, garnering good customer interest.

The announcements this year are two-fold. One is the execution of our cloud-first strategy of broader adoption of cloud technologies and specifically Microsoft Azure across every facet of our business. It’s about embracing and implementing a cloud-based operations and delivery strategy that will transform the way we deliver our services.  We are simplifying and standardizing our corporate technology stack across the company and establishing a Cloud Centre of Excellence to implement our cloud strategies and build open ecosystems for customers.  More importantly, it’s about creating and delivering services so that our video and networks customers benefit from faster time-to-market, better scalability, optimized performance, seamless interconnection to global cloud service provider networks, and easier activation and monetization of cloud-based applications.

The second part of the announcement is about deepening of our partnership with Microsoft where SES is both a key connectivity partner of Azure Orbital, as we would be building and managing a select number of gateways, and the founding launch customer of Microsoft’s Azure Orbital services. 

VIA SATELLITE: Who do you see as the potential customers for these new video and data connectivity services? What kinds of customers might SES bring in, that previously were out of reach? What are these new markets mentioned in the press release?

Hemingway: This next step with Azure Orbital is a further extension of what we started with ExpressRoute and goes beyond delivering dedicated, secure connections to the cloud. What we are really doing is bringing the cloud to the very edge of where we operate, actually integrating data centers and teleports so that we can push new applications out to our customers in a more seamless manner. The benefits to the customers are multiple. By landing traffic at co-located O3b mPOWER gateways and Azure data centers, customers will enjoy optimized network performance and the flexibility to offer value-added applications, such as enhanced security and SD-WAN, activated directly in Azure. And last but not least, taking advantage of virtualized ground systems and cloud-based applications can help SES accelerate service delivery and enable our customers to accelerate time-to-revenue.

When working with SES and Microsoft, we want all our customers to think about the advantages of being “one hop” from Azure-based services and applications. Key benefits include better application performance, seamless access to an expansive marketplace of Azure-based services, and the scalability of adding ground systems resources quickly and easily as demand requires.

Our existing customers all have digital transformation plans. We could sit back, simply observe them implementing those plans and wait for their connectivity needs to come back to us before we respond reactively to RFPs. But we don’t think this is the smartest approach.

Rather than wait for them, we should get involved right up front with a completely optimized cloud and cloud connectivity solution so that we are part of their digital transformation plans. SES embracing its own digital transformation and cloud adoption could also come in handy as we can contribute our lessons/perspective when engaging with the customer.

Microsoft has a massive ecosystem of players that are all engaging with large enterprises, telcos, governments. Instead of offering a cloud service, these players are saying, “Could I bring an optimized connectivity service to the table?” There will be some new routes to market with partners. When you think about new applications and customers, secure connectivity to government clouds are really important. I think there will be more applications in government cloud that we access today. Microsoft has a very large agreement, for example, with the U.S. government, and that is something we would like to be part of that connectivity solutions.

In terms of new areas that I expect us to get into, IoT [Internet of Things] is one of them. We don’t see it really as a separate industry. What Microsoft and others will do is put IoT processing hubs at the end of the network, so you make smart decisions locally and then aggregate them to decisions in the cloud. If we can be seamlessly part of the IoT ecosystem, then we can be part of the smart edge decisions.

Separately, when you look at edge use in telco networks, you can talk about things like EPC [Evolved Packet Core] and 5G Core elements. We believe we can also be part of that 5G ecosystem as well.

VIA SATELLITE: What do you see as the revenue potential of all this? When does it start to translate into significant revenues for the Networks side of the business?

Hemingway: Being a partner of Microsoft and offering engineering and service support behind some of the Azure Orbital Ground-Station-as-a-Service would bring about a new stream of revenues. But this is not the main reason we are doing this.

If you combine this with joined up solutions, connectivity, and cloud put together, we are starting to see really good interest in that. These are early days, but the pipeline of new opportunities — both for our existing base and for new customers — is something that is looking really promising. So, net new revenues this year, absolutely, but I expect them to scale over the next couple of years.

VIA SATELLITE: Could you give us the thinking behind the investments in ground infrastructure and co-locating such infrastructure?

Hemingway: One of the reasons we want to be a partner to Microsoft is their Azure Orbital capabilities. In Microsoft’s announcement, they have spoken about two markets — Earth Observation and global communications. We are a partner of both and we are helping them with our satellite expertise, operations, ground station expertise in conjunction with Microsoft’s cloud skills and everything else that goes with that. This will help potential land Earth Observation data directly into the combination of our expertise, capabilities, our locations, and Microsoft’s cloud capabilities.

When it comes to why we are both a partner and customer of the Global Communications Market, it’s really because we want to be one hop away from Azure.  We are co-locating our ground stations where the edge of Microsoft data centers are so that we can deliver extremely seamless and secure high-performance connectivity services.

Having such a set up means that as soon as customers connect through us, we are the natural seamless extension back into the Azure domain. We can deliver new applications to our customers. Imagine being able to download a new network function right to that data center and have it available to our customers at the click of a button. We no longer have to think about rolling out a new router or SD-WAN box as it will be right there at the edge of the cloud in software, rather than the hardware variant. We also have the opportunity to add access to the Azure Global Backbone which is one of the largest in the world, providing benefits to our customers. 

The thing about working with a cloud partner like Microsoft who has virtualized their data centers is that it inspires you. Currently at SES, when you go into these big teleports, you see racks of equipment. But having worked with the likes of Microsoft, we are inspired to virtualize as much as possible and drive that technology into our space and satellite world.  Whether we can achieve that is a question. But from the antenna backwards, it would be amazing to work with Microsoft and our modem manufacturers to expand the cloud ecosystem and virtualize all these functions and host them in the cloud.

VIA SATELLITE: Does the deal with Microsoft preclude SES from working with other major global companies in cloud-based services deals? Is this becoming an exclusive type of arrangement?

Hemingway: This is not an exclusive arrangement. As a global company, we recognize our customers have preferences. They could be Microsoft, Amazon, Google, IBM, etc. We have to maintain an open and multi-cloud architecture and embrace a multi-cloud strategy. Likewise, Microsoft will have multiple satellite operators they are also working with.

At the same time, we also recognize partnerships can be extremely strategic, and deem Microsoft to be one of these companies. Partnerships are in Microsoft’s DNA and they have an incredible ecosystem of partners. While embracing a multi-cloud strategy and wanting one of those partners leaning forward and co-developing with you, you would naturally want to have 1+1 = 3. What we are looking to do is making sure whatever we do, we beat all the rest.   

VIA SATELLITE: Could ultimately there be a spin off company combining Networks and Microsoft given how close the two companies seem to be aligning? 

Hemingway: The partnering approach is working really well so this is what we continue to pursue. There are no plans to spin off a company combining Networks and Microsoft.

VIA SATELLITE: Have you been somewhat surprised by how deeply Microsoft has gone into the space arena?

Hemingway: Not at all, to be honest. If you think about how much data we are carrying through space; whether it is the usual aero, maritime, cruise, telco, and 4G networks we deliver connectivity to, or other Earth Observation and IoT markets that Microsoft is venturing into, it is massive. If you are a cloud-scale player that can do smart things with that data and have invested in a set of data processing services, the best way to do now is to land data directly into my cloud, and I will process that data for you, and provide great AI [Artificial Intelligence] tools.

While there are terabytes of data being consumed already today, think of all the data to come from future constellations with the advancement of space systems with digital payloads and integrated virtualized ground systems. Just the operations of the future space systems would drive significant data that can benefit for machine learning and AI to optimize the operations would be massive. A cloud-scale player would want to align with Microsoft’s Azure Orbital data center and have access to one of the largest global backbones.

VIA SATELLITE: Has the COVID-19 situation impacting your potential to do deals with customers here? When we will see ground-breaking deals with potential customers?

Hemingway: COVID-19 has impacted different parts of our industry in different ways. I think like everybody, businesses are doing the essential projects. Projects that lead to greater efficiencies resulting in an effective business are getting higher attention. Which leads to us conducting trials right now with customers so that they can see how seamless cloud and connectivity solution work in practice. I see very active interest from our customers, and we will look to close those as soon as we can.

VIA SATELLITE: When do you expect those trials to conclude?

Hemingway: They are very imminent. There is one trial that is actually starting this week that will probably last for several weeks. We should see these trials come to conclusion in the next few months. 

VIA SATELLITE: Finally, what are your overall thoughts on the Networks business during what has been a challenging year for everyone?

Hemingway: This year has been challenging for everyone, and some parts of our industry. One of the things we like about Networks is that we have a portfolio of customers.

We are working very closely with our aero and cruise customers as they are having a challenging time. On the other hand, we have a really solid government business and a really strong fixed data business. The one thing that has come out of COVID-19 is the need for connectivity everywhere across countries. It has driven governments and telcos to recognize the importance of rural connectivity. We have worked with a number of customers to try and drive hospital connections, village connections, as they need to educate people on what you should and shouldn’t do in COVID. We have had a really robust fixed data business, while we have had challenges elsewhere. It has been a blessing for us. The growth in fixed data, and the digital inclusion projects is something we will see.

In terms of the year ahead, we will be launching SES-17, a very powerful GEO [Geostationary] satellite serving the Americas and the Atlantic. We also have O3b mPOWER, our next-generation Medium-Earth Orbit [MEO] communications system scheduled for launch, where we will be able to deliver secure and high-performance networks at scale and in a flexible and seamless manner. The market reaction towards O3b mPOWER has been super strong and there is an incredible amount of effort focused for us to deliver on that front.