Microsoft takes aim at cloud communication market with calling and texting services

Key Points
  • Microsoft is externalizing the calling and messaging services that it uses inside the Teams communication app.
  • The company will face competition from Amazon and Twilio, among others.
Microsoft CEO Satya Nadella speaks at the company's Build developer conference in Seattle on May 7, 2018.
Grant Hindsley | Bloomberg | Getty Images

Microsoft on Tuesday announced developer tools for enhancing applications with calling and texting capabilities at its Ignite conference for IT workers.

The launch demonstrates one of the ways Microsoft is trying to grow its cloud business by entering smaller individual markets. The company might persuade existing customers to try these tools instead of forming relationships with smaller software companies.

The collection of Azure Communication Services from Microsoft includes application programming interfaces that make it possible for third-party applications to make voice and video calls, exchange chat messages, send text messages, and create phone numbers for inbound and outbound calls.

Companies such as 8x8RingCentral and Twilio already offer some of these capabilities. Amazon Web Services (AWS), the largest cloud infrastructure provider, offers developer services for embedding text messaging and video calling into customers' applications.

Microsoft executives have said the company would not compete with its own customers. Twilio's main cloud provider is not Microsoft. The company relies on AWS for the vast majority of its cloud infrastructure needs. RingCentral uses its own data center infrastructure, while 8x8 draws on a combination of its own data centers, AWS and the Oracle public cloud.

If the notion of Microsoft being capable of running video meetings and chat conversations sounds familiar, that's because it fields Microsoft Teams, the communication app that competes with Slack and Zoom. The same technology inside of Teams is now available for Microsoft's customers to use, Scott Van Vliet, a corporate vice president, told CNBC in an interview Monday. Over time, Microsoft wants to enable customers using Azure Communication Services to connect into Teams, Van Vliet said.

People in other areas of Microsoft, such as the one developing the Azure Active Directory service, expressed interest in using Microsoft's cloud-based communication services in their own applications, and from there it become apparent that Microsoft should expose the technologies more widely, Van Vliet said.

More than one-third of Microsoft's revenue comes from the Commercial Cloud group of products, which includes the Azure public cloud, business subscriptions to the Office 365 productivity applications that includes Teams, commercial LinkedIn services and cloud versions of the Dynamics 365 enterprise applications. Microsoft has sought to grow Commercial Cloud in part by improving its sales processes in specific industries and releasing a bundle targeted at front-line workers during the Covid-19 pandemic

Also on Tuesday Microsoft announced Azure Orbital, a service for processing data from satellites. And the company said later this year that the Teams communication app will allow a person giving a presentation to appear in the foreground while the app displays PowerPoint slides in the background.

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