Microsoft Rolls Out Business Communications System

New technology expected to radically change how employees communicate with each other eplace single-vendor PX phone system in usiness communications system expected to replace will be centerpiece o
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SAN FRANCISCO - In contrast to the media frenzy surrounding the debut of video game Halo 3, Microsoft (MSFT) - Get Report has been quietly bringing out the bits and pieces of a system that ultimately will mean far more to the software giant's top line.

Although Halo 3 earned $300 million in its first week, sales are expected to taper off after the holidays. Unified communications, however, is already a $1 billion business and will be a growth engine for years to come, Business Division President Jeff Raikes said Tuesday at the system's formal launch.

With the delivery of Office Communications Server 2007 and Office Communicator 2007 this month, the system relies on familiar business software packages, such as Exchange Server and Live Meeting, and a few hardware bells and whistles.

The Microsoft platform is designed to transform the way employees work with each other. Predicting it will someday replace the single-vendor PBX phone system, which typically has no ability to communicate with corporate computer networks, Chairman Bill Gates said Microsoft has incorporated into office networks the last remaining island: the phone. Both corporate and mobile phones can finally connect easily with computers and VoIP networks.

"The transformation to software communications is going to be as profound as the shift from typewriters to word-processing software," Gates said.

The system gives users a single user-interface with voice recognition to manage all phone, email and web conferencing, Raikes said. A key feature is its ability to show the status of employees, what Microsoft calls "presence," no matter where they are. Online employees can be listed as available, busy or engaged in a web conference, and their managers can pull them into a conference with a drag-and-drop click.

The Business Division's current double-digit growth rate between 11% and 12%, most of it due largely to the growth of unified communications, Raikes said.

"This is part of what is helping to fuel our overall growth," Raikes said. "It's a billion-dollar business that's growing quite rapidly."

Although Raikes declined estimate how much was spent on research on the project, he said it has taken the biggest share of R&D dollars within the division, occupying thousands of engineers for several years.

Microsoft competitors

IBM

(IBM) - Get Report

and

Cisco

(CSCO) - Get Report

appear to be developing something comparable, with recent acquisitions of web-conferencing software developers. IBM is adding Internet messaging and videoconferencing capabilities to its business software.

For CIOs trying to envision ripping out their old PBXs, the unspoken stumbling block was the Windows operating systems' legendary instability, in contrast to always-on PBX networks. Partially addressing that concern, Gates and Raikes described the transformation as evolutionary: The software interoperates with standard PBX systems on the market.

"Many traditional vendors of PBXs are recognizing this transition and are using the

Microsoft unified communications platform" in their next generation systems, Raikes said.

The platform has taken on 50 hardware and software partners and close to 800 systems integrators.

Nortel Networks

(NT)

,

Ericsson

(ERIC) - Get Report

and

Mitel Networks

have signed on as telephony providers.

Ericsson's mobility server will be built on the VoIP call-management capabilities of Communications Server, integrating mobile phones, Raikes said.

The Microsoft communications platform is in use by some 300,000 workers at dozens of companies around the world, according to Gurdeep Singh Pall, vice president of the unified communications group.

In demonstrations, speech recognition technology, some of which Microsoft picked up with the acquisition of Tellme earlier this year, allowed alternating between retrieving and audibly playing email and voice messages from within the Outlook program.

The web conferencing system deploys Microsoft's RoundTable, a 5-camera video/audio device that recently began shipping. On monitors, the system automatically senses and highlights the image of the speaker and lets users introduce windows for graphics and video. The company sells the device at $3,000.

Another supporting peripheral is a business Internet protocol phone, with a 5.7-inch color touch screen for dialing by name, from LG-Nortel. It incorporates Microsoft technology that is part of an intellectual property-sharing

agreement signed with LG earlier this year, according to LG. Available at the end of October, it integrates the calendar and other functions from Microsoft Office.