Microsoft SMB Featured Article

I’ve written about Microsoft’s (News - Alert) Telco 2.0 strategy in previous columns and would like to revisit this at a higher level here. The other day I attended an analyst event run by Microsoft Canada’s Communications Sector group, and many of their views on the service provider market strike me as being very timely for the current environment. As such, this column and my next column will be focused more on the realities facing service providers overall, rather than just all the wonderful things Microsoft is up to.

For Part 1, I’d like to build on some of the major trends they identified, as I find them very consistent with my earlier columns, especially those focused on the platform play theme. Let’s look at three key developments – all of which are quite recent, and all of which are transformational. For the latter, this applies equally on both sides of the ledger; for subscribers and for the service providers. It is no longer possible to ignore how the end user experience is changing. If service providers do not – or cannot – adapt accordingly, subscribers will simply go elsewhere.

Development #1 – the user interface. In telephony, without a doubt, 2008 has been the year of the iPhone (News - Alert). One of the most important – and radical – factors behind the iPhone’s appeal has been the touch screen interface. Apple wasn’t the first to do this – in fact, Microsoft came to market with a keyboard-less mobile device a few years back, but the market was not ready for it. Going back further, we had the Apple (News - Alert) Newton PDA and other stylus-based touch point devices, none of which have lasted.

However, nobody has done it better with mobile phones than Apple, and all of a sudden the touch screen has become de rigueur. HTC (News - Alert) has come out with a touch screen for the CDMA market, RIM has been forced to counter with their iPhone killer - the Storm, and other vendors such as LG and Samsung (News - Alert) are here or coming with their touch screens. Apple has certainly bet right with both the iPhone and iTouch, and that interface is now making inroads in the PC market. HP is leading the way with their TouchSmart PC, and it won’t be long before Mac and the other PC vendors follow suit. Touch screen technology is commonplace for kiosks and TV screens will be the next frontier.

Why is the touch screen so popular? As Microsoft rightly states, it’s a natural user interface. I’m the first to say that nothing beats my Blackberry for typing out emails, but smartphones have a much broader appeal than inputting text messages. Of course there’s the cool factor of navigating all the features with your finger, especially when scrolling through a menu or altering the size of an image. It’s a very easy and intuitive way to interact with the device. The market has adopted this interface faster than most anyone expected, and that validation sets the stage for more important developments that have direct implications for service providers.

I don’t see Blackberry-style devices going away any time soon, but the touch screen has become a bona fide alternative that in some ways delivers a richer experience. There are parallels here to how flat panel TVs have displaced rear projection models. Both deliver a high quality image, but flat screens take up less space and are more flexible in how they’re installed. Going into the holiday season, it’s a pretty safe bet to say that flat screens will outsell everything else by a wide margin.

For those of us brave enough to cross the chasm and dispense with the keyboard, the touch screen becomes very liberating. Not only does it free up room for a larger screen, but much like using a mouse, the point and click style of navigating (another Apple innovation – via Xerox - surprised?) is more intuitive and engaging.

Why does this matter to service providers? After all, like Microsoft, they are not in the hardware business, so what difference does it make whether subscribers are using a keypad or a touch screen? Plenty, I would say. Touch screens open up new possibilities for broadband-enabled devices, both fixed and mobile. Anyone who seen or tried Microsoft Surface will know exactly what I mean. A natural user interface means that touch screens can and will be deployed almost anywhere – walls, floors, windows, furniture, clothing, jewellery, etc.  

This may be a bit futuristic, but service providers need to think this way. To keep subscribers happy, they need to be where the end users are. For most of us, this still means the “three screens” – phones, PCs and TVs – but increasingly it will extend to other devices and interfaces that touch screens can support. This is more of a longer-term implication, but there are also more immediate realities, and that brings us to the next item.

Development #2 – screens are everywhere. In the screens 3.0 examples above, screens will truly be ubiquitous, and they won’t just be fixed surfaces. There will also be fluid screen interfaces that can be enabled or invoked almost anywhere within a smart home environment. This is very much the world of tomorrow, but it’s closer than you think, and these scenarios will all be touch screen – no keyboards. In today’s world, we are starting to see examples that go beyond the “three screens” which themselves have become so common.

The car is next great frontier for screens, and many models have them today. This is no surprise, considering that outside the home and work, the car is where many people spend the most time. Another emerging area is digital signage. The advertising billboards of yesterday will soon become interactive touch screen environments; where with the touch of your finger or swipe of your access card will engage you in a host of experiences such as requesting information about a product or ordering tickets to concert.

Service providers are becoming adept at serving the “three screens”, which accounts for almost all our interaction with them today, but they still have a long way to go to create a truly seamless experience. However, just as they master this challenge, they will face two new challenges to their business. First, they will need to address these emerging screen environments, and find ways to remain relevant to subscribers when using them. This will be difficult to do, but there is no doubt that the end user communication experience will eventually extend beyond the “three screens” to other screen-based environments.

Second, there will be opportunities in these new environments for service providers to add value with new applications. This presents another challenge, as today’s service providers do not natively inhabit this new world, and they will somehow need a way to understand the new needs of subscribers as well as address them. In many ways this goes well beyond the core competency of most carriers, but as screens proliferate, the definition of value for subscribers will change.

This is where companies like Microsoft have a lot to offer. Not only will these new services need to address new needs and new screen environments, but many will have to integrate seamlessly with the “three screens”. This requires expertise across many modes of communications, and has become a strong focus for Microsoft today. Of course, Microsoft has its own motives, since they dominate one of the “three screens” – the PC – and like the service providers who control another one of these screens – the mobile device - they see the bigger picture. Neither can address all the screens alone, but working together, they can be much more effective.

Development #3 – hardware is becoming mobile. This is another important development that Microsoft discussed in their presentations. On one level, this ties into some earlier themes in this article. Today’s smartphones are as much small mobile computers as they are telephones. Service providers – especially mobile operators – can no longer think of voice in isolation from other modes of communication. Smartphones enable an integrated, multimedia experience where voice is often essential, but typically in the context of a rich communications environment.

This has significant implications for service providers, as this development will also impact how subscribers define value. I’ve long felt that the marriage of broadband and mobility is the ultimate killer app, and today we have the devices to make this possible. I should add that this development has equally strong implications for Microsoft, which is why I believe these parties very much need each other. To keep up with these developments, operators are now on a seemingly endless treadmill to build the required network capacity, without which they can keep and attract subscribers.

The challenge I see is that this will drain their ability to develop the services over their network that subscribers demand. They are very cognizant of the risk of becoming simple connectivity providers while everyone else makes the money off the back of their network. This sets the stage for Microsoft and everyone else who has something of value for end users. It’s a very difficult balancing act, but in my eyes, a necessary one.

There is a great more to explore here, and I’ll continue on this theme in my next column.