Microsoft Wants Your Office Telephone By ROBERT A. GUTH and SARA SILVER Wall Street Journal
June 26, 2006; Page B1 http://online.wsj.com/article/SB115128614920390448.html?mod=technology_main_whats_news The founding vision for Microsoft Corp. was a computer on every desk, each one running Microsoft software. The next dream is every office phone. Today Microsoft is set to announce a broad initiative into the business telephone market, including desktop phones and videoconferencing devices designed by Microsoft and sold by partners, with some available as soon as June 2007. Microsoft software programs would link the new phones to computers so that they can handle voice functions, such as making a phone call and receiving voice mail. The plan sets the stage for Microsoft to take on other giants, such as Cisco Systems Inc., Avaya Inc. and Nortel Networks Inc., in the industry march to replace traditional phone systems with more flexible and cheaper Internet technologies. New Internet-based technologies make it easier to use software and servers to combine email, voice mail, voice calling, conferencing and instant-messaging in a single system. Historically, most business phones have been managed by proprietary switching systems -- called private branch exchanges, or PBXs -- that are separate from servers managing email and other office communications. Microsoft's plan significantly escalates its move into a high-priority market where it has had few major successes to date. Microsoft Chairman Bill Gates for years has been pushing Microsoft to move into the voice business. The strategy is based partly on the belief that voice communications eventually will be managed by servers that use Microsoft software and a chip-design pioneered by Intel Corp. -- the same combination that reshaped personal computers decades ago. In April, Microsoft gave a forecast for the coming fiscal year that included operating expenses of at least $2 billion more than analysts expected. A significant chunk of the increase is earmarked for communications, Microsoft executives say. "Businesses have never been sure how serious Microsoft is about voice, and this investment makes it sound like they are," said Reuben Chaudhury, a director of the communications group at Mercer Management Consulting. The effort's importance is also apparent in the choice of its architect: Anoop Gupta, a onetime Stanford University professor and now a Microsoft vice president, who served as Mr. Gates's assistant before being tapped to create and head the communications group in 2003. "Today people are faced by a plethora of technologies which are all disconnected islands and silos," Mr. Gupta says. "Microsoft is presenting an approach that helps address this problem by bringing together many of these things." Microsoft is planning to announce partnerships with equipment makers Polycom Inc., of Pleasanton, Calif.; the Korean-Canadian joint-venture LG-Nortel Co. and Thomson Telecom, of Australia, to make and sell Microsoft-designed Internet phones by June next year. The handsets are designed to work with employee PCs and to connect to a company network, making it possible to, say, call a person on the phone by clicking their name in a Microsoft application, such as Word or Outlook. Microsoft also will announce a videoconferencing device called RoundTable, which automatically swivels to train a camera on each person who starts speaking. Microsoft is betting the devices will drive sales of server software programs, such as Exchange and Active Directory, which are already in wide use by businesses. Microsoft is set to give details of how the products are being redesigned to handle voice traffic. Microsoft is announcing an upgrade to existing software that will now be called Office Communications Server, which routes phone calls, emails, instant messages and the like. Other hardware partners include Motorola Inc., Samsung Electronics Co., Plantronics Inc., Tatung Co., Logitech International SA, and Siemens AG, which have agreed to make conferencing equipment, mobile phones or computers that are designed to use the Microsoft communications software. The shift to the Internet is a trend Microsoft needs to exploit, both to spur growth and to protect existing businesses. Its Office business software and server software could be hindered if other companies offer communications features first. Microsoft also wants to slow the spread of the Linux operating system, which is popular in servers managing Web sites and in communications applications. Rivals are racing to roll out Internet-based services that extend traditional messaging, email and voice services. Nortel, for example, offers videoconferencing and video applications that let health workers collect and send data from the field. Microsoft and its partners are developing phones that display whether people on a contact list are in the office, on the phone, or on their mobile phone -- similar to the way instant-message systems indicate which users are online. Office workers may use the phone to email or to read voice messages. Other features could enable two people on a phone call to add more people by clicking their names in a PC program. Or they could hit a command to turn a voice call into a video conference. Procter & Gamble Co. now is working with Microsoft to integrate some of its communications using Microsoft software on 100,000 PCs world-wide, says Filippo Passerini, chief information officer at the Cincinnati consumer-products giant. "Directionally it is a good idea," he says, adding: "Whether we will roll it out or not or how fast is a completely different discussion. ... We need to look at all of the implications." Mr. Passerini says P&G also is talking with other players. One of the largest, Cisco, in March rolled out its own suite of products, called Cisco Unified Communications, aimed at combining calls, conferencing and other communications on its network gear. Cisco is widely expected to invest more in Internet software for managing voice communications at work, much as Microsoft is doing. Microsoft and Cisco are partners in the communications area, but executives at both companies say Microsoft's ambitions could create tensions. "It's a conflict," says Bern Elliot, an analyst at Gartner Group. "It's been building, and I think it will continue to build." Of course, Microsoft is a newcomer to the voice business and will need its partners' help to spread its technology. A Cisco spokesman says Cisco and Microsoft have a "strong track record of collaboration around our respective products and technologies." Still, as Microsoft gets more serious, "there'll be a lot of gnashing of teeth and shaking of spears," says Charles Giancarlo, senior vice president of Cisco. The shrinking telecom-equipment market, meanwhile, is helping drive market matches such as the merger of Siemens AG's and Nokia Corp.'s telecom-equipment businesses into a $30 billion business. Among the possible effects: heightened interest by equipment makers in Siemens's business-voice unit. Siemens, which is working with Microsoft's communications software, has talked with Avaya, Nortel and private equity investors about possibly selling the unit, which had about $4.38 billion in sales last year but has failed to break even in recent quarters. "This is a significant state change in Microsoft's relationships with other companies," says Peter O'Kelly, a research director at Burton Group, a Midvale, Utah, research firm. "If it's unsuccessful, Microsoft is going to have some big problems." ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
