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Microsoft (NASDAQ:MSFT) announced today a large new deal with AT&T (NYSE:T)that will see the telecom giant greatly expand its use of Microsoft's Azure cloud services in a deal valued at roughly $2 billion.

Microsoft, the world's #2 cloud provider behind behemoth Amazon and its AWS group, has notched a big win today in the form of AT&T. AT&T has said that it will be moving most of its non-network applications over to Microsoft's cloud, and secondary to that, AT&T will move all of its business PC's over to Microsoft's 365 office productivity suite.

AT&T will move its non-network infrastructure apps to Microsoft Azure

The deal is multi-faceted with a mix of both Azure and Office 365. All together AT&T is signaling that it has a lot of confidence in the Redmond, WA-based software company. The CEO of Microsoft, Satya Nadella had this to say of the deal:

Together, we will apply the power of Azure and Microsoft 365 to transform the way AT&T’s workforce collaborates and to shape the future of media and communications for people everywhere.

AT&T has a massive amount of employees, over 250,000 to be exact. A quarter-million people switching to use Office 365 is a big deal and while license costs weren't divulged, we can rest assured AT&T got an incredible volume discount with numbers like these.

What neither firm divulges is just how much of the $2 billion value is SaaS (Office 365) versus Azure cloud services, so this new development might not increase Microsoft's global cloud market share by as much as one would expect. Regardless, competitors are going to be green with envy over the deal as all entrants in the cloud computing race have been upping the ante.

Remember, IBM just paid a record $34 billion for Redhat (NYSE:IBM) in an attempt to round out its SaaS and PaaS offerings. Salesforce (NYSE:CRM) also made headlines recently with its $15.3 billion purchase of Tableau. Most of all, AT&T taking its infrastructure applications to Microsoft must sting if your Jeff Bezos and Co. as Amazon's (NASDAQ:AMZN) AWS would specialize in this kind of cloud computing.