Microsoft Ventures Into Crowded VoIP Market

Microsoft (Nasdaq: MSFT) jumped into the Voice over Internet (VoIP) provider market Wednesday with the announcement that business users will be able to test a beta version of its VoIP and unified communications server, Office Communications Server 2007 (OCS), and unified communications client, Office Communicator 2007 (OC), later this month.

Jeff Raikes, president of Microsoft's business division, made the announcement during his keynote address at the VoiceCon Spring 2007 trade show in Orlando, Fla. According to Raikes, by 2010, the cost of standard VoIP business solutions will be half what they are today, as VoIP systems evolve from hardware to software.

"Software is set to transform business phone systems as profoundly as it has transformed virtually every other form of workplace communication," Raikes said. "Over time, the software-based VoIP technology built into [OCS and OC] will offer so much value and cost savings that it will make the standard telephone look like that old typewriter that's gathering dust in the stockroom."

Click and Talk

The communications software will enable business users to call a coworker within the organization or a customer with a simple click on the person's name within any Microsoft Office application. The software also comes with technology to help users determine whether a coworker is available and how best they can be contacted either in the office or while they are on the road.

Another key feature provides multiple methods to conduct meetings with individuals at disparate locations by choosing the "most convenient" method of communication through either voice call, audio or video conference or document sharing via the Internet.

On-the-go office workers will be able to use their office phone number and other corporate communications, tools such as instant messaging and audio or video conferencing, whether they are telecommuting from home or traveling.

Lower-cost calling plans and secure but easy access without the bother of a virtual private network (VPN) reduces the cost of communications and support while ramping up productivity for work-at-home and road warrior employees, Microsoft said.

The Business of VoIP

OCS and OC are "the most important new communications technology since Microsoft Outlook 1997," Raikes said, adding that he predicted the number of business VoIP users will double in three years to 100 million people because they will "have the ability to make phone calls from Microsoft Office applications."

OFC and OC are the next step in VoIP, taking the technology away from its hardware-reliant roots and making it another bit of functionality within Microsoft Office applications, said Raikes.

In addition, Raikes predicted this new approach to telephony will lead to cost reductions as IT departments move away from the management of multiple communications systems for telephony and software-based communications.

Crowded Phone Booth

Its technological advances aside, Microsoft is entering a space already crowded with competitors who have a lengthier history in the VoIP arena.

With its huge installed base of customers running some version of their Office productivity suite, Microsoft has a significant opportunity to move into the VoIP market by embedding the technology in its applications and by taking advantage of the company's back-end servers that support these types of communications, Dana Gardner, principal analyst at Interarbor Solutions, told TechNewsWorld.

"However, it does require all those users in their installed base to have the up-to-date software as well as the up-to-date server. So, just because they have hundreds of millions of potential folks who can use this doesn't mean that all will be moving to that higher upgrade and taking on the higher cost," Gardner stated.

"I don't see anything that will shake the consumer marketplace and make people say 'Oh, I've got to have that,'" Jeff Kagan, a telecom industry analyst, told TechNewsWorld. "It will just be another offering from Microsoft and they will carve out a niche, unless they can market well and figure out how to carve a bigger niche. There are a lot of competitors today in that niche."

Why would Microsoft take a chance in an already packed market? Microsoft has to do something to expand beyond the traditional laptop, according to Kagan. The Internet, he explained, and other services are making Microsoft less important.

"It's still important and most users still have it, but it is less important today than it was 5 or 10 years ago," he said. "They are looking to get into other business areas and it makes sense. However, I wouldn't think that a business will use this as their main and only phone line. They can be successful. It will just be an additional phone service associated with the laptop."