Bill Gates Presents the One (Really Big) Ringy Dingy
For Cisco, Nortel, Avaya and the other companies that make telecommunications equipment, this Tuesday is a sort of D-Day. — That day, Bill Gates plans to introduce Microsoft's invasion into their business, with a new line of software …
Context & Ripple Effects
Microsoft has spent the past two years staging its expansion beyond the desktop — Bill Gates headlined the company's 2006 CES showcase while its enterprise ambitions kept widening. On Tuesday he takes that expansion into territory long owned by the telecom equipment industry, unveiling a new line of communications software aimed squarely at the market for corporate phone systems.
The move puts Microsoft in direct competition with Cisco, Nortel and Avaya, the incumbents whose business models rest on selling and installing dedicated telephony hardware. For those vendors, a software rival bundling voice with the dominant desktop platform is a structural threat, not just another competitor.
First-order effects
- Cisco, Nortel and Avaya now face a direct substitute for their core PBX and telephony equipment business, sold as software from a vendor already sitting on the corporate desktop.
- Enterprise buyers gain a second procurement path for corporate voice — an IT purchase through Microsoft rather than a telecom equipment contract.
Second-order effects
- The equipment makers are pushed to respond with their own software and services strategies, since competing on hardware alone leaves them exposed to a rival whose marginal cost of adding users is near zero.
- Systems integrators and resellers who built practices around installing and maintaining telecom gear must decide whether to carry Microsoft's stack, repositioning implementation expertise toward software deployments.
Third-order effects
- If the pattern holds, corporate voice converges into the general IT software stack, eroding the standalone telecommunications equipment category and consolidating value in platform vendors.
- Incumbents whose revenue depends on proprietary hardware face a shrinking addressable market, forcing consolidation or reinvention across the telecom equipment sector.
The trend: Enterprise communications is shifting from proprietary telecom hardware toward software platforms controlled by IT vendors, with Microsoft's entry marking the moment the two industries collide.