Microsoft Software to Power Nortel Telecom Servers

It may have been one of the longest skits ever to be delivered from the legendary studios of Saturday Night Live -- NBC Studio 8H at 30 Rockefeller Plaza -- before actually coming to the punch line. But eventually Microsoft CEO Steve Ballmer, along with the president/CEO of telecom server provider Nortel, Mike Zafirovski, announced the next phase of their collaboration, which began officially in June of last year.

Their mission is to integrate Windows, Office, Exchange, and Visual Studio -- all four pillars of Microsoft -- into the next round of Nortel server hardware on Intel platforms. The smaller Nortel Communications Server 1000 will be integrated with the new Unified Messaging edition of Exchange Server, for delivery in the second quarter of this year; more high-end models with multimedia conferencing capabilities on-board will be delivered in the fourth quarter.

But what does this mean? Microsoft's demo -- only slightly upgraded from last year -- gives our best and deepest glimpse into the companies' joint plans. In short, Microsoft plans to deploy yet another instant messaging platform: Office Communicator, whose initials Microsoft and Nortel are using to represent the PC as a communications device in diagrams.

Under the new scheme, a user can utilize his OC to direct a message to anyone who has an identity in Active Directory. So if you've received an e-mail message from someone, you can reply using IM (the console of the OC) or using the telephone; and in this latter case, the phone becomes a sort of Nortel peripheral device. Using voice commands given to the audio "interface" of Microsoft Exchange, you can have the phone system reply with a voice message, an IM message (converted to text and then sent) or with an e-mail.

Similarly, the user's OC can be used to redirect call-forwarding, so that anyone placing a conventional telephone call can reach the requisite party on his OC, or conceivably through his Exchange proxy, which can take a message and forward it to his e-mail. There it can be replayed as an audio track, or conceivably translated to text.

It is not a particularly new concept, but what distinguishes this particular approach to the problem is that Microsoft's Office software is so ubiquitous in business today that the integration of point-of-presence in applications may be just tempting enough to get businesses to consider Nortel.

As Zafirovski took the helm of Nortel last year, its market share in voice-over-IP was declining by a rate of 12% per year, by Merrill Lynch estimates. It was a distant third in market share in core routers behind Cisco and Juniper Networks, though it was first in fiberoptic networking switches and gateways. Still, Zafirovski - hired away from Motorola - described the start of his mission as the equivalent of standing at ground zero.

His approach, as expected, was transformational: He wants to get Nortel out of markets where it doesn't compete, by introducing communications servers this year that will integrate functionality from traditional branch exchanges - where the company's market share is lagging - while holding its ground in leading-edge technologies. His idea: Sell businesses on the idea of replacing old PBXes with x86 architecture servers.

Microsoft is helping Zafirovski to make that case. In so doing, it's leveraging its entire brand portfolio, even if it means floating some wild ideas, such as implying the presence of a latent market among developers to create custom toolbar applications for PowerPoint and other Office 2007 applications, that utilize point-of-presence signals from Microsoft Exchange UM running on Nortel servers. Ballmer calls this a "line-of-business" application, and some have likened the concept to another kind of line, though with a bit of ingenuity -- coupled with a truckload of sorely lacking practicality -- the idea just might work.

"People have PBXes, people have audio-conferencing systems or solutions that they buy, video-conferencing solutions, e-mail - hopefully all Microsoft Exchange - instant messaging solutions, and these are all islands - the way you get provisioned, the way you sign up, your username, your address, the way you find somebody," said Ballmer during his speech today.

"How many messages do we leave, on average, in various places for somebody?...You could say it's a very livable world; we all do live in it, in fact, every day. That doesn't make it the best we can do - the best for the end-user, let alone for the IT department or for the people who are developing business applications."

"You're going to be able to give your users a powerful, single experience for instant messaging, presence, and of course, conferencing," Zafirovski clarified.

Ballmer painted a broad picture, using some fuzzy brushstrokes, of an evolved telecommunications infrastructure for all humanity, beginning this year with a move to an "integrated" communications architecture. Here, users learn to operate smarter communications clients, and Microsoft would power the software for those clients. This integration will tie everything together, including the phone, during those years in which it isn't practical for offices to consider getting rid of the phone altogether for the OC.

But by 2010, a new phase would begin, driven by user demand to enter what Ballmer describes as the "transformed" phase of communications, where some of the multiple devices we use everyday start to fall out of sight through attrition, like a vestigial sixth toe. Also during this phase, the back-ends and servers start to see further integration, utilizing a product Zafirovski outlined called the Unified Communications Integrated Branch. Think of this as an Exchange-embedded PBX replacement, provided by Nortel.

"For many, many years, both companies have really been in the business of communications. Nortel, quite obviously, has been broadly in the 'telecom business,' as it's known," explained Ballmer, making little "quote-unquotes" in the air, "and Microsoft has been in the business of helping people author, transmit, e-mail, and other information, and in a sense, it was inevitable - people have talked about it for years - that you'd start to see a convergence of communications."