Raikes Communicates

During Microsoft's annual financial analysts conference, Jeff Raikes said that Office Communications Server 2007 and Office Communicator 2007 are "code complete." Both products will release to manufacturing tomorrow.

Microsoft has been investing heavily in what it calls the "unified communications" strategy. Raikes made bold claims. Microsoft would be a "major force" in unified communications, he asserted. Microsoft's communications products would "cut in half" enterprise spending on telephony.

We'll see about that. Microsoft is a latecomer to this market and presumes that enterprises will buy into all of the necessary software. Ideally, in addition to the new communications products, enterprises would need Exchange 2007, Office 2007, SharePoint 2007 and Windows Server 2003 R2 or 2008.That's investment in six products plus associated client-access licenses. Cost would vary depending on size of company, number of seats and volume licensing plan.

Speaking of volume licensing, Raikes sought to dispel nasty analyst claims—from Forrester and Gartner—that customers aren't renewing contracts; I presume, anyway. He said that Enterprise Agreement renewals were "greater than 90 percent in the last quarter."

The number is impressive. However, analysts had focused on Software Assurance, which is attached to Open, Open Value and Select license contracts. The 90-percent renewal rate really reflects on larger businesses' behavior. Microsoft's renewal problem is more likely with small- and midsize businesses, many of which are more likely to go with Open, Open Value and Select volume licensing contracts.

I don't mean to diminish the significance of the 90-percent number. It's huge. But EAs only account for a portion of Microsoft volume licensing subscribers. Surveys conducted when I was an analyst put the number close to 50 percent in the United States. Tip: Like with other companies, Microsoft executives sometimes use good news to distract from something not so good. Big EA renewals don't necessarily mean good Software Assurance attachment to Open, Open Value and Select contracts.

Other highlights:

• Microsoft sold 85,000 seats of Dynamics CRM in the last quarter.
• SharePoint generated $800 million in revenue during fiscal 2007.
• Business division is focusing on three areas of growth: corporate desktop, server units, and consumer and SMB markets.

Raikes spoke at length about expanding Office penetration among consumers and small businesses, particularly trial conversions. Office Trial already is a successful program, based on NPD data. Trial conversions rose 105 percent between 2005 and 2006.

Raikes said so much about Office, I'll cover it in a follow-up post.