One of the more interesting trajectories to watch in the communications space over the last decade has been the growth of the Microsoft ecosystem. Literally a decade long strategy, it was conceived at the time that I ran the Windows CE planning group in the late 1990’s, when the first Microsoft smart phones were being designed. From the beginning, the core strategy was to tie the phone to the Microsoft Office and BackOffice product lines – Outlook, Exchange, and to a lesser degree the core productivity applications like Word and Excel.
Fast forwarding to today the biggest growth area in Microsoft’s Office Systems Division is, unsurprisingly, communications. That strategy, coined a decade ago, lives on. Live Communications Server, the newly announced Office Communications Server, Office Communicator, and the total integration of these technologies with the Office 2007 suite suggest a world where communications and productivity applications are inextricably entwined.
With the delivery of these products, we are witnessing the beginning of the end of the transition of communications systems from yesterday’s PBX and desk phone solutions, to complete software solutions. Pioneers in the market, using systems such as the Open Source PBX Asterisk, have long been proponents of this vision, but the entry of a market dominant player like Microsoft, with its deep pockets and channels, will drive the adoption of software solutions at a much faster rate than any grass roots movement can.
Even so, Microsoft is careful to position their solution as an adjunct to existing phone systems, rather than a replacement. Adjunct yes, but it’s really only required by those who wish a staged transition. The software stands alone, a fact that was driven home to me earlier this week when I chatted with Microsoft Unified Communications program manager Kyle Marsh. Kyle told me that some months ago all of his PBX phones had been removed from his office, and he was relying solely on software communications solutions – Office Communications Server and Office Communicator. The Unified Communications Team blog describes how this done, stating:
"The admin can use the same approach to move groups of internal users to OCS for pilots and departmental deployments. After the move, OCS will take care of all the voice features for the user, including basic calls, advanced call controls, anywhere access, and voice mail. The desk phone won’t ring any more."
"Fundamentally, the specification is all about letting customers keep their existing systems as they migrate to a fully-software based communications platform over the long term."
Three years ago, upon first seeing Live Communications Server and the RTC platform, I called back to friends in Ottawa and told them that I thought Mitel and Nortel’s PBX business would be in trouble. They scoffed. Microsoft would never get voice right, they said. My friends failed to internalize the fact, articulated in the Voice 2.0 Manifesto, that voice is just a big application. Intellectually they understood this fact, but software isn’t in their genes – not the way it is at Microsoft. You can get a glimpse of Microsoft's genetics from this excerpt on the UC Team blog, announcing the Communicator 2007 beta:
And of course VoIP, VoIP, VoIP: With this release Communicator is a full featured soft phone allowing you to finally get rid of that plastic device called a telephone you were forced to have. Not only does Communicator have all the functionality you need – including Hold, Transfer and Conference – it also has features you haven’t seen in the telephony world – like adding a subject line to a phone call or marking the call as important.
The economics of software are powerful, far beyond legacy hardware businesses. Testifying to that fact, last year both Nortel and Mitel announced partnerships with Microsoft, integrating their PBX and handset businesses with Microsoft’s communications business. A time will come when their hardware businesses will be reduced to mere rumps of what they are today, supplying plastic phones to fogies who can’t get used to headsets, and attaching those phones to server based communications systems… likely built by Microsoft, or perhaps IBM or Cisco. Their futures are as applications suppliers and ecosystem partners in somebody else’s channel. How far the mighty have fallen.
Omnivorous as ever, Microsoft has also extended its reach into embedded platforms. The Windows Mobile and Smartphone platforms have continued to grow at a rapid rate, leveraging the .NET APIs from the Windows desktop to gather developers, and adding capabilities like push email to the Exchange server. Naturally that puts pressure on RIM, the market leading wireless email company. In fact, in third quarter of last year Gartner group said that Microsoft’s unit shipments surpassed RIM for the first time in North America. Their strategy is textbook Microsoft – engage developers with an army of evangelists to write programs for their platform, work with hardware vendors to deliver the end user product, and let the ecosystem do the heavy lifting. Can RIM transform themselves into a software company, and weather this onslaught, or will they go the way of the PBX manufacturers? It’s unclear, but one tremendous asset RIM and no other vendor has is the RIM network operations center, which acts as a central clearinghouse for all wireless email on RIM devices. And what of Nokia, the dominant wireless handset player the rest of the world over? How will they fare in a world where backend service businesses are dominated by others?
Microsoft’s recently announced Response Point embedded PBX for small and medium business is following a nearly identical strategy. Early pioneers in this market, like Epygi, have watched as first Linksys, then Digium, and now Microsoft are entering this space with offerings focused on small business. Prior to Microsoft, the only OEM strategy for building an embedded PBX was Digium. Microsoft’s focus on enabling a hardware channel – putting D-Link, Quanta and Uniden into direct competition with Digium for the OEM dollars, and enabling an ecosystem to compete against Linksys and smaller players like Epygi – is bound to pressure the market from every direction.
In each case, enterprise, smartphone and embedded, Microsoft is commoditizing the underlying platform. By building shared media, signalling and API infrastructures in these environments, they can achieve economies of scale and attract developers and OEM partners at a rate which others will be hard pressed to match. It’s going to force the players already in these spaces to re-examine their strategies, inevitably causing consolidation.
So how do you avoid becoming roadkill in this environment? Where are the opportunities? There are three strategies that make sense:
- Aikido – using Microsoft’s momentum to launch complementary businesse
s. For instance, when I asked Microsoft evangelist Kyle Marsh about the federation model for Live Communication Server, he acknowledged that a more efficient strategy would be to have businesses federate against a global communications clearing house, and revealed that they know of several companies who might want to build such an asset. Even so, businesses built around the strategy of carrier interoperability with Microsoft will have to carefully ensure that they aren’t also reduced to lowest common denominator bit pipes. One way to guard against this is to take the “Geneva” option, integrating broadly with assets from Microsoft and others.
- Retreat to safety, by building vertical market applications that integrate with the enterprise communications server. Historically, Microsoft has done a great job of delivering a common platform, but have been ineffective at delivering market-specific solutions.
- War. There’s always room for a second and third player in any market. Expect to see consolidation in the market as other players scramble to accumulate the breadth of assets that will be necessary to compete with this juggernaut. And, expect to see some business fail and the field of play narrow as time goes on.
iotum’s strategy is an aikido strategy – positioning ourselves in the gap created by Microsoft’s momentum. From the beginning we’ve pursued the Geneva option, integrating broadly with products from a variety of vendors. For example, today we integrate with BlackBerry handsets, but shortly we will deliver a web based client, and later this year additional handset implementations for platforms like Windows Mobile, Symbian and Linux, leaving the door open for partnerships with the likes of Microsoft, Nokia, Ericsson, Sony and others.
iotum’s New Presence vision and the iotum Relevance Engine fit very neatly into this space. The evolution of iotum’s business is to be the central, global presence platform for converged networks. The iotum Relevance Engine is a hosted platform for New Presence applications in mobile, web, or enterprise environments. When coupled with applications like iotum Talk-Now, it’s also a hosted presence server for individuals and small businesses. Moreover, over time the Relevance Engine will become, through interoperability with enterprise presence servers from Microsoft, Cisco and others, a clearinghouse for enterprise presence which will allow enterprises to extend presence information beyond the walls of their organizations so that (for example) sales reps and their customers can know the others presence.
You may be wondering about the position that the portal players – AOL, MSN, Google and others – occupy in this world. They’re doing a great job on consumer presence, but are less useful in our always-on always-available business lives. As Jim Courtney pointed out in his February 2007 interruptions manifesto :
Bottom line: I want to be able to participate in the conversations essential to my lifestyle and my business operations – when, where and how I choose.
Microsoft’s plan is a 10 to 15 year view of the market, which is only starting to be visible today. Taken in totality, it’s a plan to dominate every aspect of enterprise communications, with the exception, perhaps, of the carrier network. In their ideal scenario, Microsoft technologies would be embedded in that network as well, although Microsoft won’t itself be the network operator. It’s exciting, and perhaps a little uncomfortable, for some. It’s important enough to Microsoft that one of their key generals, Office President Jeff Raikes, has taken on the role of leading that team directly himself.
If you’re in the communications space today, what’s your strategy for this new world? Aikido, retreat or war? It pays to know.