Newsmaker: Microsoft turns to telephony

Having conquered the desktop, Microsoft now has its eye on your telephone.

The software maker last year set out its ambition to become a serious player in the telephony market, announcing plans to turn its corporate instant-messaging software into a program that can also manage telephone functions.

Jeff Raikes, the veteran Microsoft executive who helped establish Office as one of the company's most profitable products, recently stepped in to take over leadership of the telephony business. Raikes says his unit's investment in telephony research and development is second only to the R&D investment in Office itself.

Raikes on Wednesday will lay out Microsoft's telephony plan at VoiceCon, an industry conference in Orlando, Fla. He spoke to CNET News.com by phone ahead of his speech.

Q: What are some of the key points you are making in your speech?
Raikes: We'll point out that within the next three years that we believe there will be as many as 100 million people or more enabled for making voice calls from Outlook, SharePoint and other Microsoft system applications. And if you think about where we are today, that's probably twice the number of people that have voice over IP (Internet Protocol) lines. In addition, we predict a voice over IP network will cost probably half of what it does today. We'll be announcing the betas for Office Communications Server and Office Communicator, which is the client-side application.

Jeff, you talked about this vision some months ago. How much tangible progress have you made? Where are things right at this moment?
Raikes: We had a technology-adoption program summit in December, and there were 250 representatives from nearly 100 enterprises that participated in that weeklong event. Their IT departments served more than 7 million people doing information work. We already have these customers working with the early adoption of our technology. The betas are coming out now. So we're well along on our road map that leads to that point that I'll make, which is that within three years there will be 100 million or more people able to make phone calls from Outlook, SharePoint, and other Microsoft Office System applications.

Similarly, you know, we've heard others in the industry talk about having specifications for interoperability. We're actually publishing them. And that will be available and we'll talk about that (at VoiceCon).

It's the biggest opportunity for growth that we have, and we think it's the biggest opportunity for our customers.

I mean, just think about the pace of innovation in the last 20 years. You had digital technology in telephony in the 1984 time frame. How much has your desktop phone changed in the last 10, 12, 15 years? Very little. Yet how much has your experience changed for mobile computing, for e-mail, for instant messaging? The real challenge that's held back this part of the industry is that they don't have a broadly accepted software platform that enables the pace of innovation. So what I'll be emphasizing next week is, we, in conjunction with our partners, are putting in place the software platform that will enable this pace of innovation.

Even with all those changes, given that companies have a lot of existing equipment and expertise in traditional phone systems, won't this change really still take awhile?
Raikes: That's the beauty of the approach that we take, is that we make it possible for customers to actually use these capabilities in conjunction with their existing PBX (private branch exchange) system. It's not a rip-and-replace approach. So that means customers are actually able to more quickly get to the value without having to have the expensive rip-and-replace approach that some of the other industry participants would recommend.

Microsoft's VoIP party
Office finds its voice

The software giant rolls out its unified communications system for business customers, featuring voice over Internet Protocol software designed to compete with rivals like Cisco and Avaya.

What does it look like when you use the PBX phone?
Raikes: A good example is SimulRing, the idea that a phone call is coming in and you can either pick it up on your desktop phone, or maybe you're actually not at your desktop, so you also get an instant-messaging alert saying that you have a phone call coming in, and do you want to take it on a voice over IP call using Office Communications Server, or do you want to forward it to your mobile phone.

You mentioned that this is one of the biggest bets that Microsoft is making in the Office arena. What does that mean in terms of dollars for you guys?
Raikes: Well, basically, one way to quantify it is that the amount of R&D investment that we're putting in with unified communications and voice over IP is the largest R&D investment beyond what we do in the core of Office.

And is that why you've chosen now to run the business yourself?
Raikes: I've chosen to take on this role for the combination of, frankly, it's the biggest opportunity for growth that we have, and we think it's the biggest opportunity for our customers. So, yes, that is correct.

One of the things that Steve Ballmer mentioned when he spoke with financial analysts recently is this notion of taking Exchange and SharePoint and Live Communications Server, and running them as a hosted service. Is the first version of Office Communications Server that comes out going to be available both as a traditional server and as a hosted service?
Raikes: Yes. We're big believers in giving customers choice, and many customers are going to want to run these technologies on premise, as they do today, and many customers are going to be very interested in having Microsoft or another of our partners be a provider of a hosted service for them. And so it's absolutely our intention to deliver both. Now the actual timing will depend upon specifics that aren't really worth going into right now, but the idea is to basically give customers the choice.

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[LarryLo]

What market do they think they're going after?

They are a little late to the party and they brought an ugly date.

Between Cisco and Avaya ruling the commercial IP Telephony landscape and openpbx / Asterisk playing in the Open source space, I am curious to see where they will position their products. What's the compelling reason to buy MS/Nortel?

Most of the fortune 1000 crowd has started the conversion to IP Telephony and picked a vendor. I am curious who MS thinks will buy their offering?

I think Nortel last bastion is Government and military and I can just see the conversation as Nortel tries to sell them on MS' stability and security ;)

[Stating]

Midsize, Small Bus?

There are a lot of midsize and small businesses already running Windows 2003/SBS that don't have VoIP, so perhaps that is one target market. It's a way for MS to sell 2x more server licenses, because they will require that you run their communications server on a dedicated box. Still, given MS poor security record, I'd rather run my communications server on a non-MS platform. It's not hard to provide MS Office add-ins that give you click and call. Skype already offers a click-call add-in for MS Outlook, as do others.