Originally formed in 1995 and currently headed by Vice President Maria Martinez, the Communications Sector is responsible for marketing and selling Microsoft products to enterprise customers in three broad business areas:
- Telecommunications—which Microsoft defines as wireline and wireless phone carriers, network equipment providers, satellite, and cable companies
- Hosting, which encompasses application service providers (ASPs), ISPs, and Web hosting companies
- Media, including television broadcasters, film studios, video production companies, advertising companies, and publishers.
Focus on Telecommunications Companies
In the last several years, the Communications Sector group has focused on developing, marketing, and selling customized solutions consisting of multiple products from Microsoft and partners, along with additional custom code developed internally and with systems integration partners such as Accenture. Solutions from the group often include the following two components:
- The Connected Services Framework (CSF), a server-based solution that includes Microsoft server products, adapters, and custom code that helps customers integrate new user-facing applications with their existing systems, such as billing systems. (For more information on the CSF, see the sidebar www.microsoft.com/csf.)
- Microsoft server applications or services that Communications Sector customers can combine in new ways to resell to their own business and consumer customers.
The Communications Sector pitch comes at a crucial time for the telecommunications industry, whose traditional offerings, such as data access and long-distance voice service, are facing numerous threats, including Web-enabled services, such as third-party Voice-over-IP services (e.g., Skype, Vonage), that leverage the telecommunications infrastructure but don't earn it any incremental revenue. To survive, telecommunications companies must diversify and offer new services. The Communications Sector offers many examples of possible services: consumers might want audio and video content, e-mail, calendaring, and "personal assistant" services that combine information from multiple sources (such as traffic, weather, and a user's calendar), while businesses might demand instant messaging, audio and videoconferencing, online collaboration and application sharing, and hosted PBX services (in which each employee of a business gets a virtual extension with voice mail and other services). However, these new services must be integrated with each other and with critical back-end systems for authenticating users, billing, and other longstanding services.
Microsoft believes it is uniquely qualified to help telecommunications companies make this transition, for two reasons.
Web services platform. Telecommunications companies must often connect a large number of disparate internal systems (e.g., billing, provisioning, service delivery), as well as interoperate with many partners. Microsoft has considerable experience and support for Web services, which are useful for integrating disparate systems. In particular, BizTalk Server has been built around Web services since its 2001 debut, and Microsoft is building support for Web services protocols into all its major platform products, including Visual Studio and the next version of the Windows client and server (in the form of the Windows Communication Foundation, formerly known as Indigo). By building on Microsoft's platform, telecommunications companies can more easily integrate Microsoft products with existing systems and have more flexibility when adding new services.
Breadth of products. Microsoft is unique among software companies in the breadth of its product offerings, many of which telecommunications companies can bundle, repackage, or otherwise resell to consumers. Because these products are generally built on common platforms and technologies (e.g., Windows, SQL Server, the .NET Framework), they should be easier to integrate than products from many different vendors. For instance, Microsoft already has or is developing business applications that could provide a basis for service offerings, such as communications and collaboration servers (Exchange, Live Communications Server, SharePoint Portal Server), a platform for encoding and protecting digital media (the Windows Media Platform), software for delivering TV broadcasts over IP networks (Microsoft TV IPTV), and an online gaming network (Xbox Live).
Pitch to Media Companies
In spring 2005, the Communications Sector began promoting the CSF to media companies, particularly broadcasters. These companies are confronting difficult technology disruptions, such as managing an increasing amount of digital content, delivering that content to new types of devices (such as cell phones and digital cable set-top boxes), ensuring that it's not illegally copied and pirated, and embracing new forms of advertising to account for trends such as time-shifting (when end users record a program and watch it later) and place-shifting (when users transfer a program to another type of device).
As media companies add or update their systems to address these challenges, they will face a similar problem as telecommunications companies: they must integrate new and updated systems with existing systems that cannot easily be swapped out, such as broadcast production and post-production systems, which are typically hardware-intensive. The Communication Sector is positioning Web services protocols in general, and the CSF specifically, as the best way to integrate these systems.
Microsoft has announced some partners in this effort, such as Avid (a major provider of video production systems) and Omnibus Systems (which offers broadcast automation and content management systems), and Sony Pictures is implementing a CSF-based solution.
Challenges Include Conflict with Product Groups
The Communications Sector faces some big challenges, including the following:
Vertical solutions are complex. The CSF is an exceptionally complicated solution by Microsoft standards and requires a significant time investment (for example, to build a proof-of-concept) and a high level of customization. Competitors such as BEA and IBM have large consulting teams for these tasks, while the Communications Sector group must rely mostly on partners.
Web services uncertainty. Many Web services standards are still being hammered out, and while Web services are conceptually simple, developing common standards for describing data has proven to be complex—particularly in the telecommunications space, where Web services adoption is still relatively light.
Uncertain demand. While telecommunications providers are anxious to develop new services to compensate for the decline of others, and Microsoft is happy to sell them software that might help, it's not clear that end users are clamoring for these services, whether they're willing to buy them from a general-purpose telecommunications provider or would prefer an independent third-party specialist (such as Skype for Voice-over-IP or SalesForce.com for hosted customer relationship management), or how much they're willing to pay for them. Depending on how this rapidly changing market shakes out, telecommunications companies might pull back on their investments or focus on a few areas with demonstrated demand.
Microsoft's services play. A new challenge could come from Microsoft's own product groups. In July 2005, top Microsoft executives explained that the company views hosted services as an important future source of revenue, and in early November, the company announced its first concrete steps toward this goal. Among the new initiatives is Office Live, a planned set of hosted services for small businesses, including Web site hosting, e-mail, real-time communications, document sharing, and customer management—precisely the types of services that the Communications Sector group has been encouraging its customers to resell to their end users. The role of telecommunications companies in Microsoft's own hosted services business is unclear. They might provide the broadband connections and co-market these services in exchange for a cut of the revenue, for example, or Microsoft might own the billing relationship with the customer. If it's the latter, then the Communications Sector will quickly have to identify new opportunities for its customers and modify its pitch accordingly.
Resources
Resources related to the CSF are at www.microsoft.com/serviceproviders/solutions/csf.mspx
I'll be discussing following solution in depth in my next post.
