Microsoft wants to command an even bigger slice of the business professional's desktop. The software giant already dominates computer software. Now it's making a big push into phone systems.
At an event in San Francisco on June 26, Microsoft ("MSFT") outlined an ambitious plan, complete with a slate of products and roster of heavy-hitting partners. Its goal: becoming the conduit by which professionals connect, be it by phone, instant message, e-mail, or cell phone.
With its Microsoft Office Communications Server, to be released in 2007, the Redmond (Wash.)-based outfit is promising an easy-to-use software program that will boast a range of features. Think of it as an operating system that extends beyond just the desktop—even beyond Web applications—to every device you use to communicate.
UNIFIED APPROACH. It will tie together the data from Microsoft's own calendars, e-mails, and instant messaging, with Voice over Internet Protocol (VoIP) systems from vendors like Cisco Systems (CSCO) and phones from such handset makers as Motorola (MOT). It will be integrated with video conferencing equipment from companies like Polycom (PLCM) and let users keep tabs on colleagues' whereabouts.
Microsoft is counting on this so-called "unified communications" vision to be a big growth area for its business unit. Partners, meantime, are counting on Microsoft to continue to act as a partner that will expand the workplace communications market-not take it over. "We have a pretty strong alliance with Microsoft and we've known about these announcements for a while," says Barry O'Sullivan, vice-president of IP communications at Cisco, which has sold more than 9 million business VoIP phones worldwide. "There are big areas of overlap but the largest part of the work we do is complementary."
If there's any lesson from the PC era, partners will have to keep a close eye to make sure Microsoft doesn't become too powerful. But first, Microsoft needs to deliver a killer product to match this grand vision. BusinessWeek.com writer Sarah Lacy caught up with Zig Serafin, general manager of Microsoft's Unified Communications Group, to discuss the announcements and what they mean for VoIP and the world's largest software company. Edited excerpts follow.
What's the problem you're trying to solve?The average worker has trouble getting hold of people. Our research shows that seven out of ten times you're not reaching someone the first time when you go to contact them. So even though we have all these new ways to communicate, instead of increasing productivity and effectiveness and reducing time, the wait is getting worse.
From a user perspective, [we want to] make the user experience more intuitive and person-centric. You should be able to know the availability and reach-ability of someone by looking at their name. Or if you're in the middle of a presentation [using Microsoft's PowerPoint] or at a meeting [that is scheduled in your Exchange calendar], [the software would automatically] let people know not to disturb you. You can find someone via a phone call, IM, e-mail or make a call on your Motorola Q phone, regardless of where you are across all of these devices.
Right now, IT people are running all these systems separately. What they have been asking us for is to essentially bring these things together to reduce the cost to manage these systems. We want to reduce the chaos and have a single directory management system.
Microsoft hasn't been much of a player in voice communications to date. What about the competitive landscape here? Overall the communications market is a $43 billion market and it's coming together. That includes corporate e-mail, corporate IM, PBX systems, voicemail, and video conferencing. It's incredibly fragmented, and we see that coming together into a rich ecosystem that'll be software driven. In that sense, there's no one big competitor. Other companies are taking very different approaches. Ours is to bring the power of software innovation to everyone's desktop. Other companies approaching it from different angles like network infrastructure or hardware. The market will start to define and take form, and leaders will emerge based on that.
How big a slice of that $43 billion market do you think a software product like this could represent? We're not disclosing those figures publicly, but Microsoft sees this to be one of the core business bets on how we expect to grow the Microsoft Business Div. This is a new big business growth area for the company. We're putting significant future investments directly into this.
How much money? We haven't disclosed the actual figures, but it's a significant amount of the additional R&D spending that we announced to Wall Street (see BusinessWeek.com, 4/28/06, ""Microsoft's Strange Spending Splurge,"").
What's behind the heavy reliance on a lot of partnerships here? It goes back to the 1980s, when we moved from mainframes to PCs. In many ways we think this new era of where communications are headed creates a whole new ecosystem of opportunities. Our [services] partners have knowledge and capability of how to [tailor] that. And of course, we're not a hardware company. You have to have that partner ecosystem. Instead of just making an announcement and figuring that out later, we are going to customers now and saying: We're seriously working with companies who are credible enterprise names. We want IT professionals to take a big perspective on where they want to be [with their communications strategy] in the next three years.
Any tie-ins with consumer VoIP? We do see it as complementary. The underlying technologies are the same. We want continuity between how someone works and their consumer style of communication.
Is it a given that people want the ability to be contacted this easily by phone, mobile, IM, or e-mail? What about the age-old business practice of screening your calls? That's why our approach is very person-centric. You are in control of how you want people to reach you. If don't want your information available to me, you can mark me off the list. If you think about communication patterns, there are circles of people you communicate with from the group you're working on a specific project with to your personal work friends to the rest of the people in your company.
You can decide how you want your identity surfaced out to those people by setting rules up. Like, on Wednesday, when I'm in meetings, only allow my boss to get a hold of me. When you're in a meeting or editing a document you can block different sets of people from contacting you, and it's not a matter of having to manually change these things, [you set rules and] allow the software to work on your behalf.
Lacy is a reporter for BusinessWeek Online in Silicon Valley
With Alex Halperin in New York
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