Communications Wake-Up Call

Microsoft's recent flurry of activity in the unified communications space has put channel partners as well as its competitors on notice: It's not a market to be ignored.

Microsoft now is set on a collision course with current players such as Avaya, ShoreTel, Siemens, 3Com and—most directly—Cisco Systems. It is gunning for a big piece of what it identifies as the $43 billion communications market opportunity, and it's planning to tap solution providers to help get it.

For the channel, Microsoft's splashy new unified communications strategy means two things. First, the market is about to get a whole lot hotter as the world's largest software company brings the full weight of its marketing might to bear in order to popularize the technology.

Second, channel partners need to prepare for the inevitable impact and will face tough choices as they evaluate their current vendor partnerships to see where Microsoft could—or has to—fit in. The waters are murky for some partners because Microsoft already has partnerships with many of the very companies it will now compete against.

"It's certainly not something you can ignore," said one Cisco solution provider who asked not to be identified. "Today we can choose to ignore the Nortels, Avayas and Mitels and ride the Cisco horse, keeping ourselves busy trying to keep up with demand. But we can't ignore the fact that Microsoft is on the desktop at every site we go to and owns the network operating system. Customers are naturally going to be interested in it."

With new voice and unified communications products such as Office Communications Server 2007 and Office Communicator 2007 promised for next year and a brand-new partnership with telecom vendor Nortel Networks now in hand, Microsoft CEO Steve Ballmer has left little doubt as to his intentions.

"You can clearly say that Microsoft, with Nortel, is in the business not just of unified communications, but in the business of VoIP," Ballmer said during a July press conference to disclose the new alliance.

The four-year joint development, sales and marketing pact is the deepest yet between the Redmond, Wash.-based company and an IP telephony vendor.

The partnership followed the June unveiling of Microsoft's unified communications strategy, a vision that includes the breakdown of barriers between technologies such as e-mail, instant messaging, conferencing and VoIP to create a paradigm where people connect more quickly and collaborate more efficiently. Communications Conundrum
Solution providers are quick to point out that unified communications is by no means a new concept.

"That's what we've been doing for the last decade," said Gia McNutt, CEO of Special Order Systems, a Rocklin, Calif.-based solution provider that partners with Cisco and Microsoft.

What is new, however, is the urgent, widespread need for improved communications and the ability to contact the person you need on the first try, she said. "It's more critical today because there are more mobile workers than ever before, more devices than ever before and it's more of a hassle to get in touch with people," McNutt said. "Keeping up with your messages is a full-time job if you let it be."

The evolution of IP telephony into a mainstream technology has also furthered the cause, solution providers said. While toll savings may have initially drawn customers in, it's via mobility and productivity gains proffered by unified communications applications that solution providers can add the most value.

Avaya partner Cross Telecom is experiencing year-over-year growth of 125 percent in its unified communications solutions practice, a rate that will only accelerate going forward, said Vicki Parker, vice president of sales and business development at the Bloomington, Minn.-based company.

"Everyone is trying to do more with technology vs. people," Parker said. "[Customers are looking for] high productivity gains."

Traveling employees save an average of 55 minutes per day through unified messaging solutions that enable them to access voice mails, e-mails and faxes from a single in-box, while typical employees save 43 minutes per day, according to a recent report from Sage Research. Workers can also save an average of 32 minutes per day by knowing the best means to contact co-workers, the research shows.

In many cases, customers don't realize they need unified communications, but once solution providers educate them it typically doesn't take long to gain converts, said Ken Savage, managing engineer at Waypoint Business Solutions, a Microsoft partner in Houston. "Once you deploy unified messaging, they don't want to give it back," he said.

Friend Or Foe?
Microsoft plans to build a multilayered ecosystem of technology partnerships to support its unified communications efforts, said Zig Serafin, general manager of the unified communications group at Microsoft. That means some partnerships, like those with Avaya, Cisco and Siemens, focus on product interoperability, while others, like the Nortel pact, will delve deeper into code-sharing and joint development.

For Nortel partners, word of the Brampton, Ontario-based vendor's decision to pair up with Microsoft came as welcome news as the company works to bounce back from financial struggles.

But Nortel isn't the only vendor to see Microsoft's path as a benefit. Contact center and IP telephony vendor Interactive Intelligence, for example, sees Microsoft's new focus on unified communications as a potential boon for business, said Brit Vickner, product marketing manager at the Indianapolis-based company, which bases its products on Microsoft platforms.

"We've been in the Microsoft camp for some time fighting the big guys by ourselves. For [Microsoft] to jump in helps considerably," Vickner said. Interactive Intelligence provides higher-level applications such as contact center, call recording and auto attendant that will fill in gaps in Microsoft's own offerings, he said. While Microsoft will be working with Nortel in some of those same areas, Interactive Intelligence expects to have a leg up because its offerings are available now, he said. Even the vendors that sit squarely in Microsoft's newfound direction said their partnerships with the software giant will not only continue but likely expand, despite the union with Nortel that promises code-sharing, services opportunities and joint marketing and sales efforts.

A Siemens spokesman said the company doesn't know of any potential impact the Microsoft/Nortel partnership would have on its relationship with Microsoft. Avaya, for its part, expects its Microsoft partnership to deepen over time, said Eileen Rudden, vice president and general manger of communications applications at Avaya, Basking Ridge, N.J. "We are actively working with them. I have people who are located in Redmond who work for me; we have multiple programs going on," she said. "Microsoft is building out an ecosystem. That's definitely in its interest and it's definitely in our interest to partner with them, as we have."

A Rock And A Hard Place
While vendors put on a brave face about the impact of Microsoft's unified communications push, solution providers stuck in the middle note that Microsoft's gains in the market unavoidably will come at least partly at the expense of market leaders like Cisco and Avaya. Some solution providers questioned the readiness of their vendor partners to rebuff Microsoft's inevitable competitive advances.

"I think Cisco is unprepared for this, I really do," said one solution provider that works with both Cisco and Microsoft, speaking on condition of anonymity.

For Cisco's part, executives said they are taking the Microsoft threat seriously but touted the depth and breadth of their own product portfolio and channel programs as big advantages. "Clearly, Microsoft is a major player in the desktop and in the applications space, and certainly we are paying attention. It is important to note that they announced recently a vision, much of which will not come to market for 12 to 18 months," said Richard McLeod, director of unified communications for worldwide channels at Cisco, San Jose, Calif. "We're trying to help our partners deliver real solutions to customers today, and as Microsoft actually delivers product to market, we'll certainly take a look at how that impacts our situation and our relationship with our partners."

To be sure, Microsoft is not guaranteed success in the market, solution providers noted. While its desktop dominance and focus on end-user experience and application development will undoubtedly serve as strong suits, Cisco controls the intelligent infrastructure that forms the foundation for IP communications solutions. Avaya brings extensive telephony experience and a large legacy base of customers that are ripe for migration to new IP-based offerings, while smaller vendors like ShoreTel tout loyal channel partners and high customer satisfaction ratings.

ShoreTel is also focusing on the next technology steps that will help push unified communications forward, said Jeff Ridley, director of product management at the Sunnyvale, Calif.-based vendor.

"Richer presence is going to be incredibly important because I really just want to know if you're going to answer my call," Ridley said. "Another hurdle is usable video on the desktop. Video has been chugging along and has made a lot of inroads, like being embedded in public IM services, but that's at low quality."

The fact that the bulk of Microsoft's unified communications portfolio is not yet available makes it difficult to accurately assess the impact its products or its partnership with Nortel could have, some solution providers said.

"It typically doesn't pan out the way it sounds," said Mike Vitale, owner of TriNet Systems, an Avaya and Cisco partner in Westwood, Mass., referring to vendor partnerships like the Microsoft/Nortel alliance. "It doesn't seem to scare me."