Channel programs News
Ballmer and Chambers weren't coming together to announce new development or partnership plans; in fact, Microsoft's closest communications alliance is with Cisco archrival Nortel Networks. But with Microsoft stepping up its bid for a vanguard position in the unified communications market, the two Goliaths saw the need for a high-profile event showcasing their commitment to technical interoperability and fair competition on the sales battlefield. Amid the plush opulence of Manhattan's Mandarin Oriental hotel, with acclaimed interviewer Charlie Rose on hand to moderate and add gravitas, Ballmer and Chambers joined together on stage and spoke of their armistice.
"Even where we're going to compete, what the customers want is, 'Tell me you're going to interoperate. Don't make me throw away one relationship because of the other,' " Chambers told the gathered partners, customers and press. "The days of you being either friend or foe are over."
The unusual meeting between dueling tech titans spotlighted an uneasy alliance-of-necessity that VARs say is slowly reshaping the unified communications field. While Cisco and Microsoft are each aggressively expanding into new areas that put them into direct product competition, unifying their technology and playing to each vendor's strengths is a profitable opportunity for solution providers.
D&H Distributing launched a training and incentives program in May to encourage its resellers to build combined Microsoft/Cisco solutions. An internal survey showed that 90 percent of D&H's VARs worked with either Microsoft or Cisco, but not both. Through training, the company hopes to blur those lines.
"We found that if resellers see both Microsoft and Cisco going after a deal, they'll stand on the sidelines," said Dan Schwab, D&H's vice president of marketing. "As a third party, we're able to illustrate some of the scenarios where both technologies work together fluidly, and take away some of the fear. Our initial results are very encouraging. When partners sell both technologies to the same end user, the average transaction size was 40 percent larger, because you're selling more technology."
JK Computing owner Jim Brubaker, in Blairsville, Pa., began dealing in Cisco products at D&H's urging. Customers love the Cisco brand, and combining Cisco routers and other networking hardware with Microsoft server software into one solutions bundle sourced entirely through D&H gives JK Computing better margins than selling hardware and software separately, Brubaker said.
The challenge for VARs is to walk the tightrope between two dominant and demanding vendors. In search of growth opportunities, each giant is eyeing the other's turf. Hardware kingpin Cisco has software aspirations. It recently spent $3.2 billion to acquire Web conferencing vendor WebEx, which competes directly with Microsoft's Live Meeting. Meanwhile, Microsoft's Office Communications Server and surrounding product portfolio go directly after Cisco's VoIP infrastructure business.
Next: Trash Talk
While Ballmer and Chambers pledged to keep their competitive jockeying from sullying customer experiences, they couldn't resist throwing a few sharp elbows. Asked about Cisco's deepening presence in the software market, Ballmer answered, "I have great respect for John and Cisco as a company, but in anything that they do and we do, I have more respect for us." But Microsoft and Cisco are good enough buddies to handle that kind of trash talk, Ballmer quickly added. "That's the thing we have learned to say to each other, and that's OK," he said.
Partners and their clients sometimes get caught in that tug-of-war.
"These are both proud companies, and they both believe their products are best. They have aggressive sales teams," said Dimension Data executive Jere Brown, CEO of the South Africa-based communications specialist's Americas division. "Sometimes we didn't see that the teams were working together to solve customer problems, and we did hear from customers that greater collaboration between those two would be beneficial. Of course, as an integrator—to us, that complexity is an opportunity."
Communications services firm Getronics, in Amsterdam, counts Microsoft and Cisco as two of its three top vendor partners (Dell rounds out the triumvirate). Making recommendations to clients gets harder as product overlap increases, Global Solutions Director Lee Nicholls acknowledged. "We anticipate this will be a struggle for us, to be able to say which product is better," Nicholls said. "For example, a lot of companies are using the Cisco SoftPhone on top of Windows. Microsoft will want to see that replaced with Office Communicator."
For now, solution providers say the key is playing to Cisco and Microsoft's historical strengths. Cisco has a solid reputation and a history as a communications infrastructure provider; for companies already invested in its stack, Getronics recommends sticking with the existing infrastructure but presenting it through a next-generation interface like Office 2007. For customers willing to experiment more, Microsoft's new technology is unproven but compelling.
"Microsoft has the freedom to put client functionality directly inside Office. Cisco can't really compete with that," Nicholls said. "But right now, even when we push a big Microsoft infrastructure, there's lots of networking and switching hardware running, and it's almost always Cisco. It's not quite a win-win deal for Cisco, but they never lose."
JK Computing's Brubaker said his customers aren't ready to experiment yet with Microsoft's VoIP wares. "Where products overlap, we'll sell the Cisco stack," he said. "That market is very brand-driven, and at this point, Microsoft isn't a player."
To maximize the opportunities, VARs need Cisco and Microsoft to ensure interoperability despite their rivalry—which is just what Ballmer and Chambers pledged to make happen.
"This is, candidly, being driven by our customers," Chambers said. "Companies don't want issues of competition to cause them not to be able to interoperate effectively in their own environments."
That's a lesson Microsoft took decades to learn, but partners say the company now seems to be taking to heart. In the time since Chambers and Ballmer's peace powwow, Dimension Data's Brown said he's already noticed a thaw between the two vendors' sales teams: "What I've seen in just a month is a greater willingness to cooperate and collaborate," he said. "When two leaders like John and Steve get up in front of their organizations, it's a big influencer."