The big picture: Microsoft has a renewed focus on what it does best, and that is keeping its enterprise clients happy by giving them the cloud tools necessary to keep them competitive in today's machine learning and connectivity race. This deal is a boon for both companies, with Microsoft getting access to AT&T's upcoming 5G network and the telecom giant getting access to the Azure cloud and Office 365.

Microsoft is expanding its strategic alliance with AT&T in a multiyear deal that will see the latter using Azure infrastructure as its preferred cloud provider, and later on moving most of its workforce to the Microsoft 365 suite of productivity tools. The combined value of the two contracts is estimated at $2 billion, which no doubt has rivals Amazon Web Services and Google wishing they could score a similar arrangement.

For AT&T, the move is part of becoming a "public cloud first" company, which is marketing speak for a broader initiative on moving non-network workloads to the cloud by 2024. The news comes just a day after IBM announced a hybrid cloud partnership of its own in which AT&T's business applications will migrate to the IBM Cloud, while internal applications will rest on local infrastructure that uses Red Hat, also owned by IBM.

Microsoft is the second-largest cloud provider after Amazon Web Services, and while the AT&T deal sounds like a big win, it likely won't increase Azure's otherwise respectable double-digit market share. It will, however, strengthen that position, as 250,000 AT&T employees are set to begin using the cloud-based Office 365 suite of productivity tools as part of their daily workflow.

It's also worth noting that with AT&T's 5G network slated for nationwide coverage by the first half of 2020, Microsoft will get a great testbed to develop low latency systems, with drone tracking and detection systems and factories packed with sensors as notable examples. Satya Nadella said he's hoping to expand that into self-driving cars and the Internet of Things, two key areas of interest that could see its $100 billion in annual revenue rise significantly in the coming years.

As more big companies scramble to modernize their businesses, Microsoft is looking to attract as many as it can to its cloud offering. Earlier this year, the company entered another significant partnership with Walgreens, which has other cloud players worried enough that they're forging new alliances like the one between HPE and Google in the hope of keeping up with the Redmond giant's growth.