Microsoft Sees Billions in Sales from VoIP Shift

Microsoft sees the shift by business organisations to Web-based phone systems running on its software to generate "billions" of dollars in revenue for the company, a top executive said on Tuesday.

The move to Web-based phone systems will gain momentum during the next three years and Microsoft's new server software will transform the telecommunication systems industry the way its Windows operating system changed the computer industry, said Jeff Raikes, president of Microsoft's business division.

"You're going to see history repeat itself," said Raikes in an interview ahead of a keynote speech at VoiceCon Spring 2007, an industry conference for Web-based telephony.

Microsoft's strategy in addressing the Voice over Internet Protocol (VoIP) business market differs from that of Cisco Systems which is selling fully-integrated systems incorporating its network equipment with its own software.

On the other hand Microsoft aims to create a distributed business model like the PC industry with its software at the center. Last year Microsoft and Nortel agreed on a broad alliance to address the VoIP market.

The software segment of a transformation to VoIP will grow to a $35 billion to $40 billion market, according to Raikes, and Microsoft plans to get a piece of the action.

"Ultimately, it will mean billions," said Raikes, who is one of the company's three division presidents.

Cutting Costs

An increasing number of businesses are adopting VoIP technology in some form, mainly to save costs. Yankee Group's Zeus Kerravala estimates that around 82% of U.S. companies use VoIP somewhere in their network, although only 8% have fully incorporated the technology.

"Right now, Cisco, Microsoft and Avaya are basically the main three companies in enterprise VoIP," he said.

The high cost of implementation deters many companies from making a full switch to VoIP systems, but Raikes said the cost of a Web-based phone system will come down by 50% within three years.

Microsoft sees its Office business software suite at the center of a new unified communications push that aims to simplify communications for workers bogged down with e-mail, instant messaging, Web and wireless telephony.

The Office suite, which includes Outlook e-mail, Word documents and Excel spreadsheets, is already one of the world's most widely used software applications. It incorporated a "presence" feature within Office 2007 to allow workers to see the availability of another worker for a call or message.

Any time a worker's name shows up on a document or e-mail, there is a icon that allows people to initiate a phone call with one click. This feature, according to Raikes, will save time and improve business processes.

Microsoft predicts over 100 million business users -- twice the size of the current VoIP business user market -- will have the ability to make VoIP phone calls through Office within three years.

Microsoft said it plans to start public testing of its Office Communications, or its unified communications, server and accompanying desktop software later this month.