What Can Tellme Tell Microsoft?

speech technology vendor Tellme Networks

Terms of the deal, announced March 14, were not disclosed. But industry sources said the $800 million figure bandied about at that time was not far off.

Tellme builds speech recognition applications, including the speech-initiated directory assistance systems used by many major carriers. The Mountain View, Calif.-based company claims its technology "answers" nearly 80 percent of the nation's 411 calls, or 2 billion calls a year.

Most recently, Tellme announced a free mobile search application for locating businesses by category.

One source close to the deal said it gives Microsoft -- which has long worked on its own speech recognition technology -- access to a potentially lucrative customer base. Tellme builds much of its current work on infrastructure from Nuance, even as it is embroiled in a lawsuit with that company. But it's likely that Tellme will end up moving to Microsoft technology over time.

The current technology stack includes a combination of operating systems and components, said Jeff Kunins, vice president of marketing at Tellme.

"Today, like most [Silicon] Valley companies that Microsoft has acquired, there's probably less Microsoft stack components in there than there will be in the future," Kunins said. For example, some of Tellme's current infrastructure is standard C and C++ code written on "various flavors of Unix," he said.

The application layer stuff is based on open standards and can run on any application server from Microsoft IIS to WebSphere or BEA, Kunins added.

A spokesman following up by email said Tellme does not currently use the Microsoft speech engine but is excited about "collaborating with Microsoft to make their recognizer the best in the world over time, and when they get to a place where they are 100% confident that it will give better performance than Tellme's current technology."

Indeed, Microsoft has made a habit of buying companies and then moving them to its software foundations. Hotmail and Placeware, the Web conferencing service provider that morphed into Live Meeting, are two examples.

According to Kunins, who said he would remain with Microsoft but was not yet sure of his new title, Tellme can help Microsoft in three major areas.

First, it can boost Microsoft's unified communications effort. "We can help them broaden their footprint in the enterprise and in traditional interactive voice response. Second, we can help them in mobile search. And third, we have broad expertise in software-as-a-service, speech as a service," he said.

"Speech recognition, like search, is a game of statistics and applied rules and logistics based on real-world data and on relative commodity algorithms," Kunins explained. "We aggregate information, and seven years ago we chose a service-based approach to deploying speech. We've gotten the benefit of aggregating data from billions of calls and using that to raise the ships with the rising tide. The benefits of that affect every customer, and the connection between the network effect and speech is huge."

Initially, the deal will probably affect very large Microsoft partners like the big carriers, but over time there will be a tool set for smaller VARs, according to Kunins. "More broadly, this is a platform for multimodal applications," he said.

In a multimodal call center scenario, for instance, there can be voice prompts but also pop-up screens for information, if that is more appropriate. The key is to offer the information in the best way possible, taking advantage of voice and screen, Kunins said, adding that the goal is seamless voice-and-screen interaction.

Executives from one current Tellme partner, Viecore, said they are pleased with the buyout. "Microsoft has tried to get into the call center space for a long time. This is good for the market," said Tony Lorentzen, vice president of consulting and marketing at the Mahwah, N.J., systems integrator, which specializes in contact center solutions.

"Microsoft brings a lot to the table, and Tellme has a pretty good customer base as it is. And this should expand that and, hopefully, we'll be a part of those plans," he added.

As part of its announcement of the Tellme deal, Microsoft initially planned a big conference call featuring CEO Steve Ballmer. But the next day, Cisco Systems' $3 billion acquisition of WebEx Communications eclipsed the news.

But Kunins said the Microsoft-Tellme combo is more strategic and far-reaching than Cisco-WebEx.

"The WebEx acquisition is larger in terms of company size and revenue, but WebEx is definitely a one-product and one-platform pony. They have a nice segment of the overall comms market, but it's a deep and narrow acquisition," he said. "That is similar to Microsoft's Placeware acquisition a while ago, whereas Tellme is a more fundamental technology layer. And this acquisition helps Microsoft in search, software-as-a-service and mobile search."

One Microsoft insider might disagree with that contention. When both deals transpired, he said, Cisco had astutely acquired a good Web conferencing platform, a brand that embodies Web conferencing, a boatload of cash ($300 million) and a savvy sales force.

This story was updated Tuesday with the spokesman's clarification that Tellme does not yet use Microsoft's speech engine.