Entering the ring

In a keynote address at the San Francisco event where Microsoft rolled out its Unified Communications portfolio last month, chairman Bill Gates touted the benefits of software-based computing and the power of integrating presence and click-to-talk features into business applications.

Later, in a conversation with CMP channel assistant news editor Jennifer Hagendorf Follett, Gates said Microsoft’s channel is evolving to meet the new opportunity, but noted that channel capacity could be the biggest challenge the Redmond, Washington-based vendor faces as it moves into the Unified Communications market against competitors such as Cisco Systems. He also downplayed the likelihood of Google and open-source VoIP staking a claim in the enterprise space.

Edited excerpts of the conversation follow.

CRN: Why does Microsoft need to be in the VoIP market, and when did you first determine that was the direction you needed to go?

Gates: We’re all about the magic of software and improving the kind of experiences and productivity people can have by providing software. So we’ve got, of course, Windows PC, we’ve got Office Server, we’ve got Exchange and SharePoint, on the mobile phone we have Windows Mobile, and as we looked at a scenario that we could improve dramatically, the telephone just kept coming up. It was actually a little more than five years ago that I had some of the top engineers move over to work for Jeff Raikes [president of Microsoft’s Business Division], and he created this new business area. People such as Gurdeep Singh Pall, who’s the head of engineering, moved over from the Windows networking team. So we built a team, there were a few acquisitions, very small, but that was an element of it ... but now is the first time we’ve got a solid product line. So, it’s the opportunity to bring telephony into this world so that you only have one directory and have all this flexibility – that, whenever you see someone’s name, [you can get] their presence ... [or] get in touch with them [without] having to worry about phone numbers.

In some sense, you could say it’s interesting how long people have wanted to stay with their traditional PBX because, even though it wasn’t well-integrated, it kind of worked. Now we’re showing people an evolutionary way to get these benefits when they choose. They can actually drop the PBX altogether and just have software running on the Windows server.
CRN: You mentioned that earlier from the stage, and I’m wondering, what does that mean for your partners such as Mitel or Nortel, who have those IP-PBXes in their portfolios?

Gates: Well, Nortel is a good example as is Mitel. Their skillsets include working with people in different industries, so they’re willing to take their software and put it up on top of our horizontal platform. Now that’s a big restructuring for them; it’s a big leap to organise themselves for this new, more horizontal, software-focused structure, but they’re taking that leap. They see that as a good opportunity, so their assets carry over into this world. Sometimes when you get an industry structure change such as this, like we did in computing with the personal computer, now 30 years ago, the traditional vendors have a tough time making the transition. Sometimes you have changes such as this and people realise what they have that’s unique that they should double down on.

CRN: Can Microsoft get VoIP right the first time? With this move, Microsoft will be setting itself up to face some new competitors, say Cisco, for example. Is your channel ready to take on these new rivals?

Gates: I sure hope so. Our channel has done a fantastic job with not just Office but also with SharePoint and Exchange, and the skillsets you build up helping customers install SharePoint and Exchange in terms of the directory and the investment that needs to be made there to get that right, the network itself to make sure that you have a high-quality network and the right management tools to measure how well your network is working. People expect, basically, perfection in email systems. Your work for productivity depends on it. And their SharePoint websites, people expect those to work every time.

So our channel has gotten a lot more sophisticated at these high-demand, managed applications. In fact, they’ve become a great source of feedback for us in terms of how we prioritise our R&D work. There’re some new skills here, but this is not a paradigm change.

Our channel has been doing key, high-performance, well-managed business infrastructure for some time. This is bringing them into the realtime piece, the telephony piece, in a big way. Now some of them have been doing telephony with other products and some of them we’ll be bringing into the telephony space for the first time. Both of those are great with us.

CRN: Some of your detractors might say that Microsoft isn’t necessarily known for getting its software right the first time, but particularly when you talk about VoIP, quality
and reliability are essential. What’s your response to those detractors?

Gates: Well, with enterprise software, we do a very careful rollout, even as part of the beta process. So at Microsoft, you have thousands of people that this is what they use every day. We have a huge number of customers that have been working with us, giving us feedback, some great channel partners who, of course, are themselves users of the technology and have it out in some of their customers, and so I think people should simply talk to people who have done similar installations of the software and hear about their experience. The kind of testing we’ve done here, the kind of logging infrastructure that it has, it’s ready for prime-time telephony usage.
CRN: Many of the channel partners right now are seeing IT talent shortages, particularly around VoIP. Is there anything underway that Microsoft is doing to help partners find the talent they’re going to need to be successful here?

Gates: I’d expect there are some things in that area, and we have seen partners see more opportunity with what we offer because of the flexibility and because of the openness. We have partners such as Gold Systems, which was a top Avaya reseller a couple of years ago, now doing more business already even before this release on the Microsoft platform. Because it’s a software-driven platform, your ability to connect in your own software extensions or very industry-specific software extensions you find from other people, it’s just a lot more flexible. You can pick what kind of handset makes sense because we’re open at that level, you can pick the applications software because we’re open at that level. It really is the PC approach, where it’s open at all the different layers, and for the channel, that makes a huge difference because they’re the ones that pick how the pieces go together. The more flexibility they get, the more customer-focused they can be.

CRN: What do you think is the biggest challenge Microsoft will face as it enters this market?

Gates: Well, customers all have different requirements, and I think that channel capacity to really assess those customer requirements and match not just our software piece but also the applications and the hardware to what that customer needs, I think that will probably be one of the limiting factors in how quickly this rolls out. I think it’s going to roll out very quickly, but I think that will be one of the governing factors. I completely agree that the channel capacity in the U.S. is limited because it’s an explosive area, so, of course, there weren’t a bunch of people sitting around who were VoIP experts ... I’m not personally an expert, but we may have to get creative about the training opportunities and learning opportunities that there are.

CRN: What would your advice be then to channel partners that are following you into this market?

Gates: They should assess how they can get customers to think about the productivity benefits or the cost savings here. This change allows both productivity benefits and cost savings. If you leave the PBX in place and put the software on the side, then you’re driving the productivity benefits. You could get some savings by having more calls over the Internet and get some savings by connecting to mobile phones. There are some plans where, over time, the desktop phone is modernised and others where the desktop phone basically disappears because, between your mobile phone and the big screen on your Windows PC, if you’re doing collaboration or customer interfacing, you want the big screen. If you want the mobility, then obviously your mobile phone comes in. So they have
to assess for their customer base – are they seeing these opportunities?

The reason things are exploding now is that there’s this phenomenon that when some customers start to do it and talk to other customers, then the willingness just jumps up dramatically. To be frank, the reliability of VoIP phone calls has been very high for some time, but the richness of the software in terms of the release we’re doing now, and the sense that, boy, everybody’s moving to do this wasn’t there. Now, it’s pretty clear, and this way you can evolve into it.

Partners will always be driven by the customers that they know, the industries, the area. For some partners, this will be a chance to go out and get new customers because the number of people who really understand how to help customers do these things will be quite small for the next couple of years relative to the opportunity.