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VARs to Microsoft: Welcome to the VoIP market; you're missing the point

Microsoft, Cisco and their partisans expected they'd turn the VoIP market into a bloodbath; that's not only not going to happen, some VARs say even selling voice switches is almost passe.

Microsoft Corp. made its long-promised entrance into the market for IP telephony today, announcing a series of hardware products designed to allow its Microsoft Office Communications products act as call-control and call-receiving stations.

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Both Microsoft and VoIP- and networking-market-dominating Cisco Systems Inc. have predicted that Microsoft's entry would cause a bloody battle between Microsoft and Cisco, forcing channel companies to pick sides and possibly lose sales to the hesitance or confusion of customers.

Microsoft Business Division chief Jeff Raikes amped up the rhetoric even further in March by predicting in a trade-show keynote that Microsoft's voice-over-IP (VoIP) software would halve the cost and double the number of business users of VoIP during the next three years. Microsoft would "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," Raikes said, according to a press release that followed the speech.

Channel companies, however – scarred from countless other vendor spats and focused on what their customers will or won't buy – aren't buying the us-or-them story line from either Cisco or Microsoft.

In fact, some have moved beyond the idea of selling VoIP as a series of products and are focused on selling it as a managed service in much the same way value-added resellers (VARs) can sell security or storage as a service, or the way AT&T used to sell voice.

Microsoft's VoIP plan

The Microsoft announcement – made at the Windows Hardware Engineering Conference (WinHEC) conference in Los Angeles – actually focused on products from nine original equipment manufacturers (OEMs) that have designed or modified their own handsets, cameras, conference-calling equipment and other products to work with Microsoft's Office Communications Server and Office Communicator.

Office Communications Server provides call control and connections to email and document management functions through Exchange and Microsoft's SharePoint Server. Communicator is the client application, which is designed to give users click-and-call capability from Office applications as well as an idea of whether the other party is available for a call, email or instant message.

The nine partners included ASUSTek Computer Inc., GN, LG-Nortel Co. Ltd., NEC Corp., Plantronics Inc., Polycom Inc., SAMSUNG, Tatung Co. and ViTELiX, whose specific product announcements are available at the above link.

Here is a webcast of Microsoft's unified communications announcement and a transcript of the session.

The alternative, one alternative, anyway

The alternative for the customer is to let a carrier or networking vendor host, maintain and upgrade the VoIP equipment, and only buy the phone service, according to Ben Irvine, CEO of networking-services integrator Octopus Networking in New York.

Selling only the service frees VARs up to focus on selling and servicing customers, and puts the heavy networking work in the hands of the companies that equip themselves as specialists to do it, he said.

"This is the disruptive power of bandwidth changing the way things can be done," Irvine said. "Five or seven years ago, everyone had their own email server. You had to keep it in your company and maintain it. Then it became viable to outsource that, and people have been doing it. As bandwidth increases, more and more of these services become practical and come online."

Octopus is a Cisco partner, but doesn't focus on selling Cisco VoIP equipment.

Instead, Octopus sells IP services from M5 Networks in New York to high-toned Manhattan restaurants in which the demand for reservations is so high "they can get 25,000 calls a month that come in between 9 and 10 in the morning. They're booking 30 days in advance, and if you want to get in, you'd better be ready at 9 to get in your reservation," Irvine said.

It doesn't make sense for a small business like a restaurant to install equipment sophisticated enough to handle call volumes that high and that bursty, but hiring an out-tasker that can adapt to spikes in traffic does, Irvine said.

"Plus, the Cisco equipment isn't as powerful if it's still tied to Verizon through a box on the wall," he said, referring to the interface through which a Cisco voice switch would transfer calls to a telecom provider's network. "Even if it's a great box, you're still dealing with a traditional telco and instead of a telecom provider doing your moves, adds and changes, you can have your technology vendor do that a lot easier and cheaper."

Cisco acknowledges the role of managed voice services and, in fact, Cisco cites its own customer surveys in an estimate that 55% of potential VoIP customers are interested in buying voice as a service. It also provides VoIP services educational materials for customers, as well as white papers and other guides to VARs interested in offering IP telephony services.

"Telephony is a commodity," according to Eric Berridge, co-founder and partner of Blue Wolf, a New York integrator that specializes in software-as-a-service, especially customer relationship management.

"If you're a Fortune 500 company and you've got a call center with 1,500 agents in it, I would suggest that you would probably want to own your own switch," he said. "You're going to have to do some wacky things to get your phone system to talk to your applications. But if you have 100, or 150 people in your company? Probably not."

Blue Wolf resells M5's VoIP service in addition to services from and others. He also buys M5's service for Blue Wolf, initially because he thought the cost would be lower than maintaining his own switch, but now simply for the increase in productivity from eliminating network maintenance.

"Economically it's a wash," Berridge said. "But I never have to upgrade it; I never have to deal with the manufacturer of the phones or the switch when it goes down. This is really the wave of the future for a lot of companies."

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