Microsoft and Cisco relationship not so cozy?

Microsoft is set to go one up on Cisco with the announcement -- just a day after the chief executives of both firms sang the co-operation tune -- that it plans to offer unified communications on an on-demand basis.

Microsoft's Steve Ballmer and Cisco's John Chambers set out this week how the two competitors would work together more closely. They said their respective companies would better integrate their products in areas such IT architecture, security, management, wireless and the important growing market of unified communications.

Unified communications utilise voice, video and data and a multitude of applications to allow employees to communicate more easily with a range of endpoint devices.

Unified comms as a service
At the VoiceCon conference in San Francisco, Warren Barkley, a group programme manager at Microsoft, told attendees that Microsoft was aiming to offer unified communications as a service offering. Such an offering would be ideal, he said, for widely distributed smaller businesses that didn't have the resources or manpower to set up a central unified communications platform.

Microsoft, along with Cisco, is still committed to the centrally deployed enterprise unified communications hub market, but it seems Cisco is rather more committed to this "big iron" approach.

While this week also saw Microsoft confirm the 16 October launch date for its main unified communications hub, Office Communications Server 2007, Cisco until now has steadfastly refused to enter the "software as a service" market with its unified communications solutions.

Cisco in May acquired hosted collaboration provider WebEx, which offers the WebOffice set of applications as a service, but it has made its intentions plain on the unified communications front by concentrating on selling high-spec hardware to enterprises instead.

Microsoft later confirmed the move towards a unified communications service offering, but it has not set any timeline for the move.

Jan Dawson, an analyst at Ovum said: "A war between Microsoft and Cisco is breaking out, especially in the unified communications market. Cisco's purchase of WebEx was the latest major salvo in this war, and the two companies are increasingly shaping up as the two major competitive forces in this market."

Dawson said, "The behaviour of Cisco's and Microsoft's salespeople on the front lines and their engineers in the backrooms will be what really drives market perception of their ability to work together. The tension between seeking competitive advantage through proprietary technology and establishing interoperability through open standards will remain, and both companies will have to make tough decisions about where to draw the line between the two."

The tension between the two companies may be fuelled by a rapidly growing market. According to analyst Infonetics Research, worldwide sales of unified comms products increased by 21 percent between 2005 and 2006, reaching 191 million pounds.

Avaya is the leader in the worldwide unified messaging market by sales, said Infonetics. But its top competitors, including Nortel, Cisco and Alcatel-Lucent -- in that order -- are gaining fast, according to the analyst firm. Nortel has been instrumental in helping Microsoft to build its unified communications platform.

Zeus Kerravala, an analyst at Yankee Group, said: "Unified communications is likely to test the budding partnership more than any other sector. There will definitely be pockets of collaboration between the companies, but unified communications is one area where it's going to be highly competitive and difficult for them to manage this relationship. This is a customer-facing application and they both want to own it."

Antony Savvas reported for ZDNet UK from London.