Summary
Microsoft’s latest offering sounds the death knell for traditional PBX’s. Unified (audio, video, email, IM) communications will be normal in 3-5 years. Microsoft may not dominate this market, but they will have a huge impact.
Analysis
Several different markets are converging, with efforts to merge all forms of communication (audio, video, IM and email) into one cohesive offering. So far no one vendor has been able to deliver a complete solution, although Microsoft’s latest offering moves them one step closer. The major players in this market will likely be powerhouses Microsoft and Cisco, with Nortel and Avaya scrambling to maintain their position. At the same time several different smaller vendors such as Mitel, Inter-Tel and ShoreTel are also competing in the VoIP market and would like to have a greater presence in unified communications.
Traditional enterprise phone systems included an analog PBX that cost a large fortune, managed all internal telephone services, and connected with and managed all external telephone lines. Newer VoIP telephone systems are similar, except the price of the PBX is now only a small fortune and the cost of the calls is typically nothing. This represents significant savings for those companies that are ready to install a new phone system. Those who had a large capital investment in a traditional PBX typically won’t change to VoIP until that investment is fully written off.
Email is provided by one or more clusters of servers, typically with little relationship to the PBX, even if that is a VoIP PBX. Cisco, for example, offers “unified communications” via still another box that connects their digital PBX with internal email systems and integrates the messaging between the two. IM (if any) and video conferencing (if any) are usually also separate systems. Each of these four communications methods requires a separate system and separate actions by the users.
Now Microsoft is offering it all under one umbrella. They can offer access to all four communications methods via one user interface. This has clear advantages in usability, since the systems are now at least reasonably integrated from the user perspective. The real incentive from the enterprise viewpoint, however, is the Microsoft system effectively provides a software PBX at huge savings as compared to hardware PBX’s. The cost savings in this area alone are sufficient to provide strong incentive for enterprises to adopt Microsoft’s solution.
Cisco (as well as Avaya and Nortel) is not standing idly by. It is cutting prices to be more competitive while offering more features. For example, the new Cisco VoIP systems can be integrated seamlessly with WebEx (which Cisco now owns) to provide a powerful user experience. Also, most users still want to use traditional handsets for voice calls, and connecting to local telephone service (as opposed to long-distance Internet calling) still requires an analog box in most municipalities. This is why Microsoft is partnering with Nortel and Avaya (and maybe Cisco) to deliver a complete solution.
Microsoft, which has had little presence in the communications market, can only be a winner from this. It’s not likely they can win the entire market, but they can likely swallow a big enough piece to provide a nice bulge to their bottom line. Their software PBX is guaranteed to dramatically reduce the cost of all hardware PBX’s, which will hurt margins for all PBX vendors. In a few years the hardware PBX will at best be relegated to a small market niche, while users will expect to use multiple communications methods as a matter of course.
