Microsoft Launches Office Communication Server 2007

The UCStrategies.com team – Jim Burton, Marty Parker, Blair Pleasant, and Don Van Doren - attended Microsoft’s gala launch in San Francisco of Office Communication Server 2007. Here are our thoughts of the day’s announcements and their impact on the unified communications market.

What was your main take-away from today’s announcement?

Jim: I think it’s key to recognize that Microsoft enters the market with a well defined strategy, a broad ecosystem of partners, a channel that is ready to deliver products and services, and a wide range of customers that took part in Microsoft’s Technology Adoption Program (TAP). Microsoft has invested heavily in terms of both product and channel to enter this market - and it shows. Microsoft is committed to improving the way businesses communicate and at the same time significantly reduce the cost associated with overall business communications.

Blair: My main take-away is that Microsoft is and will be a serious contender in the voice and telephony market. The naysayers who’ve poo-poo’d Microsoft’s efforts, saying that Microsoft has tried entering the voice market at least three other times and failed, are going to have to re-evaluate their positions. Microsoft is serious, and this launch is huge – as evidenced by having Bill Gates participate so visibly, as well as by the parade of customers and partners in the audience and on panels, touting the benefits of OCS. Microsoft has a long list of customers around the globe who have implemented OCS in a variety of ways, and are able to discuss the cost savings and business process improvements it has provided. The game is on!

Marty: While the launch of OCS is later than expected (based on the initial announcement in June 2006), Microsoft has used the time quite well.  The scope of the customer adoption during the extended beta period is far beyond that of any enterprise class product launch I have ever seen.  In addition, the customer results have been captured as quantified case studies. In summary, Office Communications Server 2007 is a force in the market from Day One of the Commercial launch.

Don: One of the main takeaways is the important contribution of the ecosystem to unified communications success.  As Blair mentioned, during the announcement, we saw a wide variety of applications and capabilities discussed and demonstrated. Especially when communications are built into processes and workstreams, unified communications needs to be tailored to each enterprise’s business objectives and working environment.  This means that functionality from Microsoft (or any other vendor) will need to be integrated into the existing infrastructure. Therefore, there will need to be close working partnerships between suppliers who, in some cases, will also be competing in this space.  And we will need to have knowledgeable integrators available who can provide the integration tools and skills necessary to achieve UC’s greatest promise.  The evolving ecosystem will be key.

I was also impressed with the strong emphasis on ROI.  One of the challenges that UC faces is to distinguish itself from the many other “productivity” enhancements that have been introduced over the last decade.  The budget mavens have become weary of vague promises of miraculous cost savings.  Here we saw, in some cases at least, some well thought out calculations of measurable financial impact.

How will this impact the UC market? How will this accelerate or change the UC market evolution?

Jim: Microsoft, along with some partners and competitors, are pushing the industry to change the business models that have driven the communications industry for the past 40 years. This is not only a change from a vertical to a horizontal industry, but from hardware to software products. Microsoft is pushing for endpoints to change from closed proprietary phones to a variety of devices that include wireless headsets, dual mode phones, USB phones, Ethernet phones and computers with built-in phone capabilities. Microsoft will do this not only by supporting open standards, but mostly by providing interfaces to its core technologies and encouraging hardware partners to innovate around those interfaces. As Don said, the ecosystem is key, and Microsoft demonstrated today that is has a formidable ecosystem of partners.

Marty: The Office Communication Server 2007 Launch extends the Unified Communications market dramatically in the direction of the software-based, fixed and mobile, desktop-centered model for UC.  With Microsoft's delivery of OCS and with IBM's parallel response on the Lotus SameTime platform, there's no doubt that Internet Protocol (IP) Communications tools will populate business desktops around the globe.  These tools will likely become the dominant method for "communications integrated to optimize business processes" in both formal process-based and informal user productivity based formats.   

Blair: I’ll be the devil’s advocate and say that since the market has known about Microsoft’s plans for OCS for a long time now, the actual release of the product won’t make that much of a difference as far as other vendors’ product plans. As Marty alluded, the introduction and release of OCS in general has already had major repercussions on the industry, with other vendors busy introducing either competitive offerings (i.e.; IBM and Cisco) or products that will integrate with OCS in order to provide a more complete UC solution (Nortel, Mitel, Siemens, etc.). Many partners have been waiting for this release and for Microsoft to provide the APIs needed for their product integration, so expect to see a slew of interoperability announcements over the next few months. There’ll be new products announced that integrate and interoperate with OCS, which will certainly help accelerate the UC market. But as I said, vendors and enterprise customers have been planning for this launch for months.

Don: Ironically, the announcement may both accelerate and impede the market development in the short term. Accelerate because it brings the visibility and customer awareness that any Microsoft announcement has. Impede because it may cause enterprises to delay some of their plans while they evaluate the impact of what was said today, or potentially wait for the Microsoft offering to be proven.  In the long term, of course, this is a strongly positive accelerator for wider market understanding and acceptance. This is a strong announcement from Microsoft, and announces their clear commitment to be a significant player in this rapidly evolving UC marketplace. UC’s success will be governed in part by the ability of enterprises to understand and fully appreciate the potential impact of these capabilities on their operations. Having different vendors offering strong products and functionality can help in that process. UC announcements are coming from telephony, desktop, applications, and portal suppliers.  While there is the potential for confusion because of different definitions and approaches, having strong offerings from a variety of suppliers means that enterprises can see many ways these capabilities might perform well within their operations.

How will this impact future enterprise IP PBX purchases?

Don: Over the past several decades we’ve seen an erosion of voice communications traffic away from the traditional PBX.  Past milestones on this road include the growth of mobility, PDAs, and other wireless technologies, e-mail, instant messaging, and many others.  UC will accelerate this erosion by enabling, through presence, better alternative connection modalities and by further enabling peer-to-peer functionality. It seems inevitable that, as communications become more integrated into business processes and workflows, the role of a separate, stand-alone, PBX-based communications system will diminish.  Today, most knowledge and information workers’ daily activities center on computer-based activities, not on their desktop phone. To the extent that UC enables most of their communications needs to be met by functionality incorporated into their applications, the need for a separate communications server will drastically diminish.  Of course, the PBX manufacturers are scrambling to understand how they can best continue to participate in this marketplace.

Jim: We are entering a period of time that will be very challenging for organizations needing to upgrade or add new PBX capabilities. With the promise of lower costs associated with business VoIP solutions, and the fact that most vendors are not yet offering lower prices to their customers, enterprise customers will have to think hard about investing in an IP PBX solution. In the very short term, companies that need new PBXs will continue to purchase them. In the longer term, it is more a question of what is an IP PBX. Most major vendors have acknowledged that their IP PBX’s will become feature servers in a unified communications environment. The question then will be, do enterprises buy their feature server from a traditional IP PBX vendor or as part of another vendors offering (i.e.; Microsoft’s OCS).

Marty: At one point in the past, it looked like OCS 2007 could be a direct competitor to the enterprise PBX.  But that's not what we see in this launch. As with many innovations, the customers are just naturally using OCS 2007 to create new and different solutions to business problems. The new solutions are in areas that are "unserved" by PBXs, since OCS 2007 offers new modes of fast, simple, information-based collaboration.

Microsoft reported that many of the extended beta customers did not go to the trouble of integrating OCS 2007 to their PBXs, but achieved what they needed simply by installing gateways to the PSTN. It looks like selected groups of users within an enterprise will just move their communications preferences to OCS 2007, flanking the PBX rather than competing with it. The effect in those enterprises will be a gradual, then increasing decline in the number of phones purchased. 

Of course, the PBX and IP PBX systems will continue to serve certain applications such as call centers, operator consoles, IP phones in public spaces, or IP phones in special applications (e.g. retail environments), but the era of a TDM or an IP Phone on every desk is probably disappearing. Those IP PBX suppliers that realize their value is as a partner or adjunct to the Microsoft (and IBM) solutions will likely have the best experience over the next 5 years. For example, an IP PBX supplier (such as Nortel) that realizes that it can deliver over 50% of a Microsoft OCS implementation  by providing the phones, gateways (via a slimmed-down IP PBX), and installation services can do well in this transition (see Part 1 on "Solving VoIP and UC Pricing Puzzles at https://ucstrategies.com/VoIP_UC_Pricing_Part1.aspx).  An IP PBX supplier that goes further and becomes a systems integrator (as IBM did when computers were disaggregated in the 1980s), can even thrive in the future.

Blair: While I’ve heard from some enterprise customers that they may consider holding off their IP PBX purchases in order to see what Microsoft comes up with, I don’t see OCS impacting IP PBX systems too much for the next 3-5 years. I agree with Marty in that there will be a gradual decline in the number of seats or phones purchased, but as Jim mentioned, if a company needs a new switch in the next year or two, they will most likely purchase an IP PBX from a traditional vendor. On the other hand, we may see some companies who currently have TDM switches that will still do the job for the next 3 years possible go straight to an OCS call control solution and bypass an IP PBX purchase entirely. It’ll be interesting to see how many companies actually leapfrog the IP PBX and go straight to an OCS call control solution. I think the number will be higher than we expect. This will significantly impact the IP PBX vendors, who will have to re-evaluate their strategies – quickly. Enterprise customers will have more options than ever before, and with options comes confusion and fear, uncertainty, and doubt.

Based on the announcement, what should enterprise customers be thinking about? What should enterprises be doing?

Marty: My first response is that every Enterprise should be running pilots in the areas where these new tools can make a big difference in their business operations and processes.  A very impressive example is described in the case study on Global Crossing (in the ROI White Paper at www.microsoft.com/uc), highlighting a 75% reduction in effort and an 80% improvement in customer responsiveness while transaction volumes rose by 70%. 

To help Enterprises with these pilots, we recommend studying and using the RFP Template descriptions and samples now available on at UCStrategies.com.  These suggest the technologies to purchase for each of eight (8) different Unified Communications applications. 

The key is to take action, rather than fall behind in testing and deployment of these new tools.  Of course, our UniComm Consulting team is prepared to help enterprises identify and plan out the investment sequences and justifications for UC Applications.

Blair: Enterprise customers should be thinking about the same things we’ve been saying for the past year and a half – identify the ways in which UC solutions can benefit your company, and implement UC in those pockets within your organization. Look beyond the individual productivity improvements to how UC can help your enterprise increase sales, reduce costs, and enhance customer service. Begin pilot projects and trials, identifying the business processes and communication “hot spots” that UC can help with. Remember, you don’t need to roll out a UC solution across the enterprise. Instead, focus on specific jobs, roles, and business processes where it makes sense. And while Microsoft is making a big splash and this announcement is very significant, recognize that there are other vendors with compelling offerings that should also be evaluated. Talk to your existing vendors – including your PBX/IP PBX vendor, application vendors, and mobility providers, to determine how their products will interoperate with OCS (or Sametime). Make sure that there is interoperability before you get too far and realize that your existing products and applications may not work in the new environment. If they’re not already working together, put some pressure on your vendors to ensure interoperability. As we mentioned, it takes an ecosystem.

Jim: The first thing users should do is do nothing. They need to plan how they will evolve from their current solution to a UC solution. The second thing they need to do is consider what would happen if any of their major technology suppliers was not there to serve them in the future. Remember what happened in the computer industry - many of the market leaders did not make the transition from midrange computers to PCs. This industry will go through a similar cycle with market leaders not making the transition to the UC world.

Don: I agree with Jim that for some companies “do nothing” (at least immediately) is the right answer.  However, as he also suggests, planning is essential.  So, my answer to what enterprises should be doing is, “Get ready.” The UC marketplace is changing rapidly, with new products, new partnerships, and new announcements coming almost weekly.  For many companies, there is no urgency, no triggering event that necessitates immediate action.  On the other hand, you should certainly understand how you will be incorporating UC functionality into your business before your next major communications infrastructure purchase.  Moreover, our research and consulting experience shows that there are significant opportunities and benefits that companies can realize right now through effective deployment of UC capabilities.  And in these situations, the best applications frequently do not necessitate wholesale replacement of current infrastructure to achieve many of the benefits. 

We believe that there will be several overall implementation strategies available for UC.  Many suppliers will suggest wholesale implementation of basic UC functionality throughout the entire enterprise. This approach certainly enables a level of personal productivity and allows many users the opportunity to experience UC capabilities, and possibly incorporate them into their daily work. An alternative approach is to rifle-shot specific application opportunities in workflows and business processes, where UC can make dramatic impacts to address communications bottlenecks, by reducing cycle time, shortening process steps, or eliminating staffing requirements.

What’s important is that companies understand their current environment -- technology, business opportunities, and most importantly, their overall strategy for how best to make the inevitable transition that will come in this marketplace.  Take the time now to understand the capabilities and the position of all the different vendors coming into the UC marketplace.  Understand whether your application opportunities are rooted in interpersonal communications – the province of the traditional PBX suppliers – or in business processes and workflows, where desktop or applications providers may be more important. 

Take time now to plan your overall strategy and approach to UC.  Understand now what your applications and opportunities are likely to be.  Identify the trigger points that mean you need to move to incorporate UC functionality, and how you will best do it.  And stay on top of the changes that will continue to come in this rapidly changing market.  What to do now?  Get ready!