Ovum: Microsoft’s vision for IT service providers and software developers

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Ovum: Microsoft’s vision for IT service providers and software developers

Microsoft provided an update on everything that it sells to service providers including software and services that operators use to run their internal businesses, which account for an overwhelming portion of the revenue.

Microsoft held an analyst briefing, which indicated that Microsoft's revenues for the Communications Sector exceeded US$2 billion in 2007.

According to independent research firm Ovum, Microsoft segments its ‘Communications’ sector business between software and services sold to the service providers and those sold with them. Microsoft's approach for the latter category is a combination of telco and Microsoft hosted services aimed at the enterprise and consumer markets.

Microsoft currently has over 40 deployments of the Microsoft Connected Services Framework (CSF), a service aggregation platform, with the majority of those operators providing commercial services.

According to senior vice president of Ovum Brett Azuma, Microsoft laid out a cogent set of services for both the SME and consumer markets. While some of the target ARPU numbers were a bit generous, it does point to a set of attractive services for the operators to offer. The price model is a revenue share which is a good way to remove much of the financial risk in deploying new services.

“While Microsoft claims integration of its solutions as a key differentiator, there appears to be nothing across all of the services which gives them bundling leverage except price. This is good for operators, but it reduces Microsoft's opportunity to dominate this market,” he said.

Additionally, it has positioned its ecosystem to enable ISVs and Developers to migrate their offerings into SaaS applications. It is a three-step program which includes upfront discount licensing and architectural guidance to incubation centers and finally into the CS Sandbox, claims Azuma.

“The CS (Connected Services) Sandbox is a program and online facility to enable ISVs, SIs, service providers, and application developers to test new services and integrate them with web services available from Microsoft and other participants. We have seen a number of other initiatives within operators to also reach out to ISVs including, BT's service oriented infrastructure and AT&T via its SaaS agreement with SAP,” he said.

According to Azuma, Microsoft announced that over 2,000 developers have started to work with the CS Sandbox. The purpose of the sandbox is to provide a live proving ground for service mashups. The company believes that mashups will be an important source of service innovation going forward. Development and testing sandboxes have become quite popular among vendors trying to build development communities.

With over 70,000 ISVs and 6.5 million developers, the group of developers participating in the Microsoft CS Sandbox remains a small portion of their developer community. The Sandbox was announced a little over a year ago. The open question is why there are only 2,000 developers currently involved. Two of the possible conclusions one can draw are that ISVs see communications as a limited opportunity or that the tools and technology are too hard to leverage.

These conclusions have significant impact on the pace at which this market will develop, he said.

“Microsoft has done much to build a strong support program to help the operators ranging from aggressive licensing terms to co-marketing programs. While helping the operators to start offering new services is key to getting things going, this represents the back-end of the innovation pipeline,” said Azuma.

Azuma believes the front end is the application developers that will feed much of the innovation to the industry.

“In addition to providing technical support, Microsoft will need to go the next step to help these developers commercialise their offerings in order to create a sustainable development model,” said Azuma.

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