How Long Will Microsoft Need Its PBX Partners?

| October 8, 2007 | Enterprise Communications | Advisory Report

| Analyst: Brian Riggs

Issue

Over the past year or more Microsoft has gone out of its way to garner the assistance and trust of PBX developers and other vendors as it transforms its corporate instant messaging server into more of a call processor for businesses of all sizes. Given Microsoft’s highly competitive nature, however, will this cooperative idyll last? Is there evidence that the company will take more of a go-it-alone approach to the development and sale of business VoIP solutions?

Current Analysis Perspective

To date Microsoft has eagerly partnered with PBX developers as the Redmond giant blazes new trails into the communications market. The company recognizes that it is entering a large and established market dominated by hardware and software developers that have for years, in some cases decades, delivered highly reliable business communications solutions.

Microsoft, though well-established as a provider of operating system software, server platforms, and office productivity and other business applications, is not known as a developer of robust communications software. It has yet to deliver its first generation of communications platforms, and has neither a customer base nor a reseller network prepared to immediately accept the various communications solutions that will soon be made available.

For this reason Microsoft has formed alliances with numerous communications solution specialists. It has teamed with Siemens for the delivery of unified communications solutions jointly based on Siemens OpenScape and Microsoft Live Communications Server, and with Mitel for tight integration between LCS and the 3300 IP PBX.

Microsoft’s alliance with Nortel spans wide-ranging R&D, sales, and marketing initiatives that will ultimately place Microsoft Office Communicator at the heart of businesses’ communications networks, potentially displacing the need for the PBX systems that presently form the backbone of business communications—and also gives Microsoft access to Nortel’s large channel.

Microsoft needs these companies – and others with which is has partnered – to lend credibility to a communications product strategy that is still in its initial stages, one that will need to fit into enterprises’ existing communications networks based on non-Microsoft products. PBX vendors for their part need to show to support for Microsoft’s initiatives, because many of their enterprise customers are seriously considering the corporate instant messaging, unified messaging, and similar products Microsoft is already delivering or is preparing to deliver to them.

When Office Communications Server ships later this year, the company will deliver a platform that can form the basis of a business communications network. But in the near term OCS is unlikely to be received as the PBX replacement it purports to be. It is likely that it will be a good while before a representative number of businesses, particularly large enterprises, are convinced to abandon the PBX systems that have delivered such highly reliable communications services for so many years.

Besides this, the general trend in server-based voice systems is away from Microsoft-based platforms and toward more affordable and reliable Linux platforms. It is clear the Microsoft will need to rely on its PBX partners for quite some time.

But Microsoft does not intend to rely on its PBX partners forever. This became rather clear last week when the company started taking preorders for Response Point, a small business voice platform that will become generally available before year’s end (for more information on Response Point, see “Microsoft Small Business Summit: Microsoft’s Multi-pronged Attack on Telephony,” March 21, 2007).

Unlike OCS, which relies on integration with various third-party communications software platforms and applications, Response Point requires no such crutch. Microsoft is the sole provider of the call control software, voice features, automated attendant, speech interface, and unified messaging software integrated into the little device.

Response Point integrates closely with Microsoft applications such as Exchange and Outlook, but demands no integration with voice systems or other communications applications that may be deployed at small businesses. It is very clearly a replacement system, aimed to displace – not peacefully coexist with – other, better established communications platforms that might happen to be at the small business.

That said, Microsoft has partnered with D-Link, Quanta, and Uniden in its development of Response Point systems. But these are mainly hardware suppliers with ties to the market for consumer router and handsets, rather than developers of rival voice systems that Microsoft might ultimately displace. The only exception at this point is Aastra Technologies, which sells PBX systems and SIP handsets for third-party PBX developers. Aastra will sell a small business voice system based on Microsoft Response Point and Aastra peripherals, mainly to stake a claim in a small business telephony market for which it does not currently have products.

As Microsoft grows in confidence as a provider of communications software, as Office Communications Server matures into a reliable, feature-rich platform for business communications, expect the company to begin casting off much of its reliance on third-party voice systems suppliers in the development of comprehensive communications solutions for enterprises and mid-market businesses.

In the long term Microsoft will approach the enterprise and SMB communications market in a way similar to the way it is about to approach the small business voice systems market. As OCS is instilled with a wider range of voice features, when and if the platform establishes a track record for reliability and performance, as Microsoft becomes better recognized as a developer of business communications systems that are viable alternatives to PBX, expect the Redmond company to forge more competitive, less cooperative relationships with other developers of business communications systems.

Recommended User Actions

• Businesses of all sizes should closely monitor the communications products Microsoft brings to market, not just when they are first released, but as they are improved and updated with new capabilities. Communications developers of all stripes are promising end user productivity gains as a result of integrating communications applications and business processes. Microsoft, though still in the early stages of delivering reliable and feature-rich communications software to market, is very well positioned to integrate its telephony products with some of the most widely used office productivity applications.

• Those considering Microsoft Office Communications Server as the basis for a workgroup or an entire company’s communications system should demand performance tests comparable with PBXs and key systems on the market. They should also demand details on reliability and continuity features to be delivered with OCS.

• Small businesses with 20 or fewer employees in the market for a new voice system should investigate Microsoft Response Point as a potential alternative to more traditional voice platforms, but only if they can wait until the product ships later this year.

• Small businesses considering Response Point should ensure that their Microsoft reseller is qualified to install and support the company’s voice systems, as well as assist in the integration of Exchange and other Microsoft applications into the platform.

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