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With Tellme, Microsoft Picks up Another Piece, But for Which Puzzle?

In announcing on Wednesday that it will acquire voice services provider Tellme Networks Inc., Microsoft picked up another puzzle piece that could fill holes on several puzzle boards – unified collaboration, speech-recognition solutions, mobile applications, even Software plus services (Microsoft's take on Software as a Service). The question is, which of those puzzles will get this particular piece?

There was notable confusion on a media and analyst call to announce the purchase of the privately held company based in Mountain View, Calif. One area of concern was over the purchase price, which is rumored at $800 million, but which neither Microsoft nor Tellme executives would comment on.

While financial analysts seemed generally supportive of the deal, several of the callers did wonder exactly how Microsoft plans to use Tellme's capabilities, which overlap with speech recognition research and technologies Microsoft itself has been working on for a decade.

Microsoft Business Division President Jeff Raikes said Microsoft is buying Tellme's hosting experience. "Why Tellme? Because Tellme has the best hosted speech platform for services today. [It's] used by 40 million people per month," Raikes said. "Their investments in speech recognition and voice will enhance our own technologies."

Tellme co-founder and CEO Mike McCue added that the company's volume of calls – Tellme's customers include American Airlines and the Domino's Pizza Inc. – is as much a driver of platform maturity as any laboratory work. "Last year alone, we did almost 10 billion speech utterances. What that has allowed us to do is to make the platform smarter and better and more capable," McCue said.

There are two areas right off the bat where the announcements could benefit Microsoft partners. If Microsoft integrates the Tellme hosted capabilities quickly into its unified communications platform and its speech platforms, those platforms will be richer for solution provider and ISV partners to start building on. There are challenges in both areas. Microsoft has just release Exchange Server 2007 with its unified collaboration technology set, so some technology will need to be elbowed out or enhanced. Same goes on the speech platform side, where Office Communications Server is pretty well baked.

Other areas where the technology could fit, include mobile services and search, which would be primarily an opportunity for Microsoft to compete with Google for the broad search market. Raikes also positioned the acquisition as an important step in Microsoft's Software plus services effort. However, the company is calling that a longer-term opportunity.

All of these areas make sense. But even in a company with Microsoft's size and available cash, priorities have to be set. You can't do everything all at once, at least not well. Stay tuned for more detail on which of these opportunities will get priority.

Posted by Scott Bekker on March 14, 2007 at 11:57 AM


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