When the news broke yesterday about the pending Microsoft acquisition of MetaSwitch I was going to write a post outlining why, but pal Rich Tehrani did such a good job with his, by providing a first glance analysis, I decided to hit pause and let my thoughts settle in.
Pain and Suffering
First, I wanted to look at who this hurts.
This is a big blow to Ribbon who had been rumored to be deep in talks to supply Kandy with the telecom functionality that Microsoft lacked. Ribbon is/was one of two SBC providers already certified to work with Microsoft Teams for direct routing to analog devices via gateways and one of six with SIP based SBCs. The second company on the list that came to mind, literally, was Audiocodes, which like Ribbon was already on the approved list. While Microsoft will likely continue to allow them to be approved, where do you think the bulk of the business will go. If I'm Ribbon or Audiocodes I'm checking my contract and NDAs, meeting notes and more because all that intellectual capital that was shared with Microsoft is now their's to apply with MetaSwitch...OUCH. Oh, and this in a broadside way hits Oracle too via Acme Packet and Tekalec acquisitions, but for Oracle this buy doesn't cut as deep as it does to Ribbon or Audiocodes.
Next I took a look at where within Microsoft the transaction was being announced. It wasn't the Teams or Office groups, but instead it was Azure. This is as poker players say, is a "tell" because it's where the NFV (network function virtualization) and SDN (software defined networking) will reside.
In essence everything that MetaSwitch that can be in the cloud, will reside there. Here MSFT will be able to be a telecom pieces and parts supplier to telcos, mobile operators and enterprises wanting to have a full stack solution. This immediately takes aim at Nokia, Ericsson and the Chinese supplier Huawei. If I'm working with Qualcomm or InterDigital, I'm quickly checking what patents MetaSwitch was using of theirs, or seeing what I've got telephony wise for openers and I'm heading to Redmond to talk to Microsoft about as those algorithms that scale and can work with 5G.
More importantly, for upstarts like Telet Research in the UK, who are working on filling voids created by mobile operator NotSpots with mobile connectivity, this type of stack immediately gives them the all cloud infrastructure they need. Add Teams to that, complete with softphone, and they have a carrier in a box solution for 5G. This is important because small cells, 5G and enterprise workers = mobile operator of your own. Little Telet is poised to be a leader here.
The reason for this is at the enterprise level, Microsoft can begin to offer a unique combination of "work site" and "remote workplace" services, and delivery of them in a more secure, highly available environment. This got me thinking about Skype. Many have cast Skype to the curb with teams. But one piece of Skype's technology of old was a really serious encryption algorithm. JOLTID which was virtually uncrackable at the time.
This piece of technology, which has been sitting on the sidelines as Skype morphed to SIP and in turn laid the groundwork for Teams, is incredibly important as enterprise customers look for more privacy that encryption provides. All one needs to do is look at Signal, Telegram, WhatsApp and even SilentCircle, to realize that shadow IT in the voice, text and video world all are thriving. Move the P2P encryption into the NFV/SDN world and give the enterprise back its privacy and Microsoft has a sector gobbler. Why? Like Cisco, enterprise IT has learned to trust Microsoft flaws and all. And as Teams keeps being their heroin into the Office, and as Microsoft keeps using the "drug dealer strategy" where that first hit's free, the door is being opened. Not narrowly, but wide enough to roll the truck through.
Next is timing. Microsoft has been testing telephony with Teams via what they call Direct Routing in the UK and Canada and now has rolled it out in the USA. For the next 18-24 months I see this as more of a solution for the do it your selfer type techie, or the Enterprise IT group that has a department large enough to support a round the clock telephony IT team.
While some may infer that this is a threat to the likes of 8x8, RingCentral, Vonage or Dialpad, that's hardly the case. Doing telephony right and keeping it running isn't easy at all. And while others may think this attacks the white label players who focus on the small to mid market business world, it's also not a threat. There's just too much complexity to doing telephony right, and unlike Apple, or even Google, Microsoft doesn't make doing things easy. If anything, they help support the ecosystem of IT engineers and techs more.
One also has to look at what this does to Google. Microsoft is never the "first mover" into any sector. Google has their fledgling Google Voice for Business service. It gets almost no attention. You never hear of it really being used, promoted or touted. Google is spending more time fighting Zoom with Meet than making what was internally called Wolverine a day to day business service. If Google isn't chasing the phone using market themselves, Microsoft, which has always been known for "selling through the channel" likely won't be either. Sure business can add this to their Office 365 service, but without some helping hands, well, it won't be on anyone's must do list anytime soon. Move on, as for Microsoft they have bigger fish to fry.
More Pain, More Gain
It does however bring up ideas of how this hurts Microsoft's perennial nemesis, Cisco, and their Broadsoft acquisition. Now MSFT has something for the large telcos like AT&T, Verizon, Vodafone, Orange, Telstra who can market the TEAMS telephony service at likely better rates than their Broadsoft licenses. Microsoft has been courting them since the Skype buy, and its been working. Big pond. Big fish. Channel. All what Microsoft wants.
What API Would Like With That Cloud
Instead I would look at what API's can be built from the MetaSwitch stack and think about how instantly Microsoft can become the CPaaS slayer of Twilio, Nexmo, Plivo, and provide the type of integration web devs need to look to Zapier for. If I'm Twilio I'm looking to Amazon or Google for richer alignments, as the ability to deploy, distribute and scale in the Azure cloud is likely as good or better than AWS, and Microsoft can bundle those pieces and parts that right now a develop has to cobble together. Those features also are the same kind of integrations that Slack users love and which Teams is chasing. Well, not much longer.
This is an upper end of the tech stack type play for Microsoft in the short term. The NFV and SDN aspects of the buy, and the pieces and parts to support telcos and really the enterprise scale business are clearly there. Add in Teams and the soft entry point is telephony, but this is really about Microsoft becoming an Information Services provider, not simply about dial tone.
For Microsoft this is about getting businesses, the big ones to switch to Microsoft Azure, back to Office and from Slack to Teams.
That's why this is about is what I'll call: