Microsoft Lync – Opportunity or Threat to Service Providers October 15, 2012

Within our Global Service provider customer base we are being asked more and more about our opinions of Microsoft Lync. Service providers are interested to understand its real role in the market as it certainly appears to be getting traction in certain segments of the market..  In principal it can be seen to have a number of roles:

–          Fully Converged Unified Communications: The capability to replace an onsite PBX, and provide additional video, presence and messaging capabilities

–          Supplement PBX Infrastructure: Provide advanced Unified Coms capability, but utilise existing PBX for voice

–          Singe Customer Hosted Capability: Provide either full or partial capability for a single customer in a data centre environment

–          Multi-tenant Hosted Capability: A service provider builds a solution it can offer to multiple different customers from one technical environment, competing with the likes of Broadsoft/Genband

Evidence of Current Market Acceptance

illume has found it difficult to get clear evidence from Microsoft on how successful it is being in these areas. However at the recent UK Convergence Summit Steve Tassell from Microsoft commented that “Globally there are over 3 million voice lines are connected using Lync” and “We have hundreds of thousand of true PBX type Voice seat deployed in the UK”.

From our surveys we are struggling to see that there can be so much adoption of Lync as a true operational PBX replacement. We would have expected to see evidence of a massive growth in SIP trunking, among the Service providers who are offering connectivity to Lync.  So far in the UK although seeing an upturn in interest in terminating Lync there are still only a limited number of providers certified, which can be found at http://technet.microsoft.com/en-us/lync/fp179863 and in our last SIP trunking survey at the end of July there was no massive increase in Lync related SIP trunks in the UK.

I think the confusion maybe one of terminology, I am sure that Microsoft has deployed the number of Licenses with the full functionality they mention, but whether they are all being used in a full operational PBX replacement  mode maybe the question.  Indeed over a beer recently a customer told me they were looking to deploy Lync as a PBX replacement, and contacted their Microsoft partner only to be told they already had the licenses they needed.

I think there is little doubt that Microsoft Lync is already having a significant impact in the Unified Communications space, the question is whether this will indeed lead to a full replacement of existing Voice capability and technology.  I think we are starting to see market acceptance and probably 10s of thousands of Voice line already operational in the UK, and this is surely starting to impact traditional PBX vendors.  Also its clear that a large number of Microsoft customers could easily migrate to the solution at some point in the future.

I think on the downside the migration from PBX is going to be slower than suspected, as in a large number of markets enterprises already have fairly advanced  IP PBXs and it may be hard to convince them to forsake these in the short term, unless they are at a renewal point or the  UC benefits are so compelling to overcome any such objection.  So in short-term there we believe there will be significant numbers of full Voice customers, but the major opportunity will be in offering other UC capabilities.

The other market that Microsoft Lync has been positioned to attack is the Hosted Multi-tenant space, where service providers offer a capability to multiple customers off one infrastructure. This market is quite a developed market with the likes of Broadsoft, Genband and Cisco HCs being quite advanced in this space. Microsoft has demonstrated a potential architecture for Service Providers, via their partner SIPCOM.  The architecture seems to utilize a number of technology partners including Brocade, Juniper, Hp etc. I am less convinced that Microsoft will be successful in this space for a couple of reasons:

Service Providers Committed:  Most service providers in the World have already made a choice of platform for this space, be that Broadsoft, Genband, Cisco or another vendor. So the ability for Microsoft to displace this technology may be very difficult

Technical Solutions: Service providers have found that deploying these infrastructures, when they are from one vendor always is more difficult than they expect. So to deploy a architecture where there are multiple parties is likely to put them off.  I guess Microsoft is likely to offer to do this for SPs but generally my experience is Service providers do not like to outsource these choices.

New Partner Ship Opportunities

Microsoft has a very established partner ecosystem, and a large number of these partners will have limited understanding of the Voice and Data infrastructure world. There is a great opportunity for service providers to build new partner relationships with these Microsoft partners, to help delivers solutions together and as new channels for your services.

Summary

We think in the coming 12 months there is going to be a very real opportunity for Service providers to deliver the infrastructure to terminate voice traffic from Lync, by offering SIP trunking and Gateway based solution. We also think there is an opportunity to offer hosting infrastructure that can be used to host Lync Customers whether for voice or not.  We are more sceptical about the opportunity for service providers to offering a multi-tenant infrastructure for Lync, and will keep close eye on how this progresses. I guess the nagging thought Service Providers will have, is whether the closer integration between Skype and Lync will lead to more traffic being terminated over Microsoft’s own network and only time will tell on that one.