The software giant is enhancing the capabilities of its Skype for Business offering, portending "direct conflict" with carriers, according to one of its partners.

Iain Morris, International Editor

December 14, 2015

4 Min Read
Microsoft Comms Threat to Carriers Is Growing

Telecom operators playing in the unified communications (UC) market are at risk of being squeezed out of it almost entirely as software giant Microsoft continues to encroach on their turf.

The Seattle-based company last month added new features to its Skype for Business UC platform that are designed to address earlier limitations, such as the lack of support for traditional phone calls and PBX functionality.

The moves could drive enterprises looking to reduce cost and complexity away from traditional telco offerings and into Microsoft Corp. (Nasdaq: MSFT)'s embrace.

Most enterprises already rely heavily on Microsoft, and many could feel that adding the software giant's communications offering to their package of services now represents a logical step.

"It would lead to huge cost savings for the enterprise -- cost savings of between 30% and 50% over the existing telecom solutions," says Sonu Aggarwal, the founder and CEO of Unify Square, a Microsoft partner on Skype for Business. "That is why we see that around 90% of global Fortune 500 companies have something going on with Skype for Business, and around half of them have concrete plans or actual deployments around Skype for Business being their telecom infrastructure of the future."

Aggarwal clearly has a vested interest in touting the attractions of Microsoft over traditional telco offerings: Unify Square provides a variety of support services for Skype for Business customers, employs a number of former Microsoft executives (including Aggarwal) and has even received an investment from Microsoft in the last 18 months (the amount was undisclosed).

Even so, Unify Square already serves enterprise customers including Credit Suisse, ExxonMobil, Nestle, Shell and Unilever, while data published by market-research company InfoTrack in June this year backs up Aggarwal's assessment.

According to InfoTrack's survey, 52% of US enterprises were already deploying Lync Enterprise Voice -- as Microsoft's UC voice offering was previously branded -- and another 30% were planning on investing in this or Skype for Business in the future.

Operators such as the UK's BT Group plc (NYSE: BT; London: BTA) have also recognized that Microsoft has aspirations to become a carrier in its own right, putting the software player on a collision course with telcos.

"The deep inroads Microsoft is making into enterprise communications portend direct conflict with the carrier community in general and a shift in revenues from carriers -- with their traditional minutes- and ports-based businesses -- towards Microsoft," says Aggarwal.

BT is one operator that has been forced by customer demand to adapt its own UC offering so that it supports Skype for Business, but Aggarwal says it is the "exception rather than the rule," with most telcos still resisting the Microsoft incursion.

Moreover, while BT is supporting Skype for Business, it has previously sounded dismissive of Microsoft's PBX capabilities and ability to address the regulatory challenges that face telcos. (See BT Plays Down Microsoft-as-Carrier Threat.)

That Microsoft continues to enhance the PBX features of its offering will be troubling for the UK operator, even if the software player is unlikely to find a quick answer to the issue of regulation.

"Moving into the cloud for communications... does make Microsoft a carrier and invite the attention of regulatory authorities," acknowledges Aggarwal. "BT is right in making those assertions in terms of uncertainty."

Want to know more about the impact of web services on the pay-TV sector? Check out our dedicated OTT services content channel here on Light Reading.

Nevertheless, Aggarwal does not believe that greater regulatory scrutiny will in any way derail Microsoft as it advances further into the communications space, arguing that telcos will have to play a different role in this market.

"Microsoft will have the core of the solution but that still leaves a vast open area for ecosystem players, including more enlightened carriers, to offer highly value-added services that make new technologies work for the enterprise," he says.

Providing help desk services and ensuring the enterprise side of the communications pipe is functioning "at quality" are two examples of such telco opportunities that Aggarwal cites.

BT, interestingly, is offering enterprise customers an IP/MPLS alternative to the public Internet for connecting to Microsoft Azure, the software giant's cloud computing platform, and it recently expanded the scope of that offering to include Skype for Business and Microsoft's other Office 365 applications. (See BT to Unveil New Cloud Partners by Christmas.)

"I still think there is a strong role for a partner going forwards unless Microsoft is going to cope with all of the regulatory issues and all the complexities of enterprise solutions," said Neil Sutton, BT's vice president of global strategic alliances, when asked by Light Reading in November why Microsoft would want to continue collaborating with BT in this area.

Founded by Aggarwal in 2008, Unify Square currently claims to serve more than 50 Fortune 500 companies and over 150 Fortune 1,000 customers.

It does not disclose details of earnings but says its revenues have "nearly doubled" in the last 12 months.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

Read more about:

Europe

About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like