A Good Buy For Microsoft?

What could Microsoft do to strengthen their unified communications story? Do they need to or can OCS take them to the promised land? They're already well known as a collaboration and Web 2.0 player and by bolstering their UC position they could dominate the market with a killer value proposition around Universal Collaboration.

Obviously to this point they have been relying on OCS as their UC platform. However, they've changed their go-to-market strategy a couple of times already which suggests they could use some help. Now, they could buy time for the next 2 years, waiting for OCS to mature but I doubt Microsoft, nor their customers have the patience. The other alternative, that seems to becoming more and more likely, is for Microsoft to acquire a more mature UC vendor and take market share inorganically. I would assume now that a Yahoo takeover is off the table, Microsoft has some M&A cash to burn.

On the surface, the most obvious target for a UC acquisition would be Nortel, especially considering they have the ICA agreement in place already. But not so fast...in most people's eyes the ICA has all but disintegrated; Nortel's technology hasn't been exactly cutting edge over the past 4 years and they've had a ton of financial difficulties.

More recently, Microsoft sunk some investment dollars into Aspect so they may be a target. But Aspect would only give them some niche Contact Center applications. That said, they could probably also pick up Interactive Intelligence pretty cheap as well. But I think they are thinking bigger than that...bigger than just contact center.

I believe the biggest bang for Microsoft's buck right now is Avaya. Avaya was purchased last October by the private equity combo of TPG/Silverlake. The leveraged buyout was done for $8B...well below the $45B Microsoft was willing to pay for Yahoo. For the right price, I am sure Charlie Giancarlo and company would be willing to part with their investment. Avaya's appeal comes in several flavors - TPG/Silverlake have spent the last 8+ months getting Avaya into "fighting shape", making it a more efficient operation; Avaya owns significant market share in both Contact Center and UC; Avaya has spent the last 2 years building integrations into many MS apps; Avaya is well positioned going forward to take advantage of advances in SIP, CEBP and cloud computing (with its acquisition of Ubiquity in 2006/07); Avaya has a mature pro services organization; and finally, Microsoft wants to beat Cisco in a real bad way.

The only potential roadblock could be the fact that Google has been rumored to be interested possibly acquiring Avaya as well, having spent "a significant amount of time" at Avaya's HQ in Basking Ridge, NJ lately.

Industry pundits suggest that a Microsoft acquisition of Avaya could happen as early as this summer...turning Microsoft into the undisputed global leader in UC and contact center maketshare over night.

Software + Services

Software+Services (S+S) combines hosted/on-demand services with local on-premise applications. By bringing together the best of both worlds, you can maximize choice, flexibility and capabilities to enable competitive advantage and drive innovation.

A good place to start this discussion is to make a delineation between S+S and SaaS (Software as a Service). SaaS is a model of software delivery where an application is hosted as a service that customers consume/use across the Internet. By eliminating the need to install and run the application on an enterprise's on-premise network, SaaS alleviates the burden of related maintenance, ongoing operation, and support. Thus SaaS should be considered 1/2 the S+S story (with the other 1/2 being on-premise software applications, managed and maintained directly by IT).

By combining on-demand and on-premise application delivery, organizations can get the best of both worlds. Here's why...some applications make sense to run on the internal network, under the control and supervision of IT. Core applications like call control and voice mail, ERP, desktop O/S, email, network admission control are all examples of the types of apps that would typically reside within an enterprise network; behind the firewall under strict IT control. These types of apps are often defined as hardened core services and usually have an 18-36 month software revision cycle. They are back-end systems with a focus on the "ilities" (i.e. availability, survivability, scalability, reliability, etc.).

On the flip side are a set of emerging user-/customer-centric Web 2.0 software applications. In past blogs we've talked about some of these: workspace apps (i.e. Facebook for the enterprise), IM and presence, collaboration tools, etc. These types of apps represent "Web-paced innovation" as they often come with 3-5 month software revision cycles. Can you imagine the challenge that presents to an IT organization if delivered in-house? Where do you think these apps would fit in the list of project priorities? This is where leveraging a SaaS model makes a ton of sense. Leave it in the cloud and let the service provider worry about keeping things up-to-date. The business reaps all the benefits of the applications and lets IT focus on core service delivery. Additionally, as previously discussed, in order to maximize the effectiveness of workspace applications and presence information, the software needs to be accessible by anyone within the enterprise ecosystem. Thus to create true universal collaboration they need to be able to traverse trust boundaries.

It's not enough just to deploy these two models side-by-side. The true value of S+S is the seamless integration of these two paradigms. The end user/customer shouldn't have to concern themselves with how an application is being delivered or if an on-premise application works with the hosted software. It's all got to be seamless. Here's a good, but simple, S+S example: lets say Mary is using an on-demand workspace application. She reviews some edits made by Frank and would like to discuss the changes with him in real time. In a true S+S environment Mary can simply highlight Frank's name from the team list and select the "click-to-call" option, provided by a seamless integration to the on-premise IP-PBX, and the call is connected via her desk phone, soft phone or mobile phone.

The Bottom Line
The S+S approach enables organizations to easily develop and support applications that provide the kind of experiences that their users and customers are looking for. S+S makes it much simpler to strike a balance between "Web 2.0-style" applications that are built to take advantage of web-paced innovation, and the "foundation" applications designed as core hardened services to deliver reliability, availability and scalability. The bottom line is that S+S enables organizations to drive innovation and build sustainable competitive advantage.

CEBP: A UC-Business Process “Mash Up”

As discussed previously, as commoditization occurs, UC becomes less capable of providing companies with a competitive advantage…in essence, it loses its business value and becomes a pure IT conversation (our solution uses less boxes than theirs).

The good news is that we identified one opportunity to elevate the value of UC to a new level - Universal Collaboration – the marrying of UC and Web 2.0 principles.

Now, I’d like to discuss two additional trends that can help organizations realize sustainable business value in adopting a UC strategy…trends that, of course, have close ties to Web 2.0: Software+Services (S+S) and Communications Enabled Business Process (CEBP). This week we’ll focus on CEBP and next week we’ll attack S+S.

In Web 2.0 terms, CEBP can be best described as a UC-business process mash up – combining two distinct business elements to create a super-process; one that is communication-enabled. The goal of CEBP is optimize business process by reducing the human latency that exists within any given process flow. For example, a mortgage approval process may be experience human latency because the person assigned to providing an approval is on vacation or busy working on something else. To reduce this latency, CEBP leverages UC capabilities (i.e. UC services) by embedding them into the business process flow. The result is a more efficient, more automated closed-loop process; translating into significant ROI.

In this example, if the person does not provide the necessary approval within a designated period of time then the business process would invoke a UC service such as “notify and respond” from an IP-PBX, voice portal/IVR, conferencing application, etc. These embedded UC services would “notify” the person that they need to do something. If the person does not “respond” to the notification then it can be escalated to a manager in the same manner.

In fact, there are a number of UC services that could be embedded within a business process to reduce human latency. These could include: conference [on demand], alert, escalate, contact resident expert, etc.; all of which create measurable business value.

The great thing about CEBP is that it can be applied horizontally across different lines of business and different industries. Virtually every business process is hampered by human latency. Some other use cases that CEBP can be applied to include: roadside assistance, stock portfolio alerts, personal information loss, claims processing, inventory management, etc. Here is a more detailed example:

CEBP Claims Processing Use Case Example
Let’s look at a healthcare claims resolution business process. The organization’s goal is to decrease claim close times and improve their closure rate. However, the process is hampered by several inefficiencies - the paperwork process is manually intensive; time-sensitive dependencies on member signatures resulting in significant delays in the approval process.

The CEBP solution is to automate and communications-enable the claims process with embedded UC services like: reminders, alerts, and notifications.

CEBP Modeling Example:

Click image to enlarge

Quantifiable business results include: decreased close times; greater agent/specialist productivity, enabling them to spend more time adjusting claims rather than fielding calls on the claims; increased revenue and member satisfaction/retention.

Many UC vendors claim that they do CEBP today. However, one very important distinction needs to be made…there is a difference between communications integrated into business process and communications enabled business process. For example, ucstrategies.com defines UC as "communications integrated to optimize business processes”. It is person triggered as illustrated in examples like adding a Click-to-Dial function to an ERP or CRM application. As described above, CEBP is much more sophisticated in its ability to automate business process flows; it is usually event triggered, providing a much stronger ROI to many lines of business and vertical industries.

Web 2.0: Federating The Contact Center

[Podcast]
Contact centers are not going to disappear, however, the idea that the contact center is treated as a separate entity from the rest of the enterprise is going away. This week I was asked about what trends I thought were emerging in customer service. I told him I thought Web 2.0 was one of the most relevant trends in this area. Gauging by his reaction, I am pretty sure that wasn't the answer he was expecting. So I set forth to explain my position.

Look at the messaging the major industry players are marketing these days. It's all centered around the idea of extending the ownership of the customer experience to include knowledge workers. The trend is towards a federation of contact center functions and enterprise functions (If some of this sounds familiar, we started this conversation earlier in the year in the blog, Creating a UC Folksonomy. This builds on that initial thought...).

The way some of the vendors are approaching this is by creating greater ties between contact center applications and unified communications. Proof point - Microsoft recently made an equity investment in Aspect (a leading contact center vendor). The press release talked about extending the contact center functions via UC and Microsoft's OCS platform. In fact, Aspect's new marketing slogan is "Unified Communications for the Contact Center". Cisco and Avaya are also taking similar approaches.

However, I think it's going to take more than just UC to accomplish this. Its got to go beyond just connecting with a resident expert who happens to be sitting in a branch office or mobile environment. For end customers to see value in this model it's going to have to involve a highly coordinated, collaborative effort to create sustainable value. This will take two things core to the Universal Collaboration concept (remember that Universal Collaboration=Web 2.0+UC): a connected workspace (per last week's blog) and a strategy that stretches beyond the boundaries of the traditional enterprise. It needs to include an organization's ecosystem (business partners, technology partners, suppliers, contractors and consultants). This goes back to the conversation around traversing trust boundaries/firewalls from a few weeks back...integrating UC capabilities from different corporate domains, federating presence from disparate collaboration platforms, seamlessly integrating on premise and on demand/Saas applications, etc.

A funny little story related to this topic is that in 2003 a colleague and I collaborated on a paper that proposed the idea of using UC to extend the management of customer relationships to the knowledge worker. At the time, senior management thought it was a ridiculous idea that would never catch on, yet here we are and it only took 5 years!

What role do you think Web 2.0 and UC will play in the future of customer service? How will the contact center look in five years?