Dial MS for telecoms

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From mobile phones and IPTV to OSS and messaging, Microsoft is penetrating right through the telecommunications industry. The person right at the top of that effort is former Bell Labs engineer Maria Martinez, who not only heads building the company's strategic relationship with the industry but is also in charge of every single sale of Microsoft Office to a telco. Interview by Alan Burkitt-Gray

Maria Martinez on Microsoft's telecoms vision

You can see the Microsoft name and the logo wherever you go in the telecommunications industry. It's known as the biggest company in the personal computer software business, but over the past few years it has shown a steady and increasing interest in all sectors of telecoms.

Microsoft software is there in mobile phones and PDAs. It has an increasing presence at OSS events such as TeleManagement World. And just over two years ago it had one of the biggest stands at the ITU's 2003 exhibition in Geneva, where the company announced IPTV partnerships with operators around the world.

The person in charge of these moves is Maria Martinez — and, as she explains, "a lot of software in the world is tied to communications". And yet it's sobering to think that only a decade ago, following the launch of Windows 95, email and internet access were optional extras for PCs.

Today "PCs are more and more tied into communications", she points out: it is hardly a computer if it isn't plugged in — literally or via a wireless connection — to the internet.

But until recently, Martinez admits, Microsoft did not have a really strategic relationship with the telecommunications industry. "We had relationships with CIO-level executives through selling our existing core products into the telecoms space," she says. An operator might have "40,000 desktops" using Microsoft software, "but nothing strategic".

When Microsoft hired Martinez in mid 2003 she had been running her own start-up, Embrace Networks, which specialised in software for web-based services. That was after 12 years at Bell Labs in management and development of Unix systems and a spell at Motorola running the company's digital cellular infrastructure unit.

Running her own company "was fun", she says, and at the time "I said I was never going to go back to a large company. But Microsoft approached me and I liked the idea. It was like a dream come true. It was like a start-up in a large company."

Telecoms, media and entertainment

Martinez was hired as vice-president for the communications sector, a couple of levels below CEO Steve Ballmer himself. Her responsibilities including the telecoms, media and entertainment worlds, both service providers and network equipment makers, throughout the world.

And, uniquely for Microsoft, her team covers everything that the company sells to this sector. "My team is the only team that sells everything."

That ranges from a dozen copies of Microsoft Office up to full-scale server systems, and including everything on the way, from security software to Xbox. And the scope gives her the challenge to change the message that the telcos and others felt they were getting from Microsoft. "We were working in strategic stuff but they didn't want to know," she says. "But the value now is in services and our message is that we want to partner with telcos. We are transitioning away from selling software to the IT department to partnering at the top line."

According to the official biography, one of her key responsibilities "is the transformation of Microsoft technologies into a cohesive set of powerful solutions for creating and integrating services and simplifying operations so that companies can manage their business growth effectively". She is also responsible for worldwide sales, marketing, consulting and support services for all customer segments within the sector.

The Bill and Steve moment

And it's clear that Martinez is leading a strategy for Microsoft that has the full backing from the top of the company. When Global Telecoms Business interviewed her in early January, the Bill and Steve moment came quickly.

This is the point, reached in almost any meeting with any Microsoft executive anywhere in the world, when he or she fixes you in the eye and says a reassuring word about the way Bill was saying only last week how you guys were really showing the way ahead.

When the Microsoft executive in question is busy discussing an e-commerce system with a fluffy toy manufacturer in Omaha, or an e-government system with a local council in rural Yorkshire, this can be flattering but, well, just a little hollow.

But the hierarchy shows that Martinez — a telecoms engineer with a distinguished track record at Bell Labs and Motorola before becoming a CEO — is close enough to chairman Bill Gates and Steve Ballmer, the CEO, for her declaration to be taken seriously: "Bill and Steve are very committed to this space," she says about Microsoft's involvement in the telecommunications industry. And it's plain that she is right.

It's meant a significant change for the way Microsoft does business in this market. "It's the difference between selling software and selling full-value propositions to go to market with."

It's come at a good time, of course. With all-pervasive broadband, wireline telcos are thinking hard about what they can deliver to customers in addition to plain old voice services. People are wanting to use mobile handsets to check and send emails, and mobile operators are looking at the opportunities from TV and other types of content.

Logging on via Windows

And, as she points out, those wireline customers are more than likely to be connecting PCs using Microsoft Windows to their broadband services. The mobile world is more fragmented, but mobile versions of Windows are now in many cellphones and PDAs, and it's usually Windows laptops that log onto wifi hotspots.

The first task for Martinez and her team has been to take Microsoft's existing portfolio and customise it for the telecoms industry, "to package the technology and make a better solution", she says. "One of our biggest challenges is to get the word out about our range. Many don't realise what we do."

And she and her colleagues have taken the debate up a couple of grades in the industry's hierarchy, she says. "Right now I am engaged on a weekly basis with very top executives in companies about business propositions. How do we go to market?" she says.

For Microsoft, telcos represent a "huge market opportunity", Martinez admits: "They are investing huge amounts of money in their networks and then they need to figure out how to put services on them." Microsoft's task, she says, is to identify services that it can help telcos to deliver, not just to consumers but to small and medium businesses over broadband or mobile connections — "services such as messaging and storage — Microsoft brings a whole range of applications".

There's a particular effort round the company's Exchange-based hosted messaging platform, which telcos have traditionally not offered but is starting to grow rapidly. "By June 2006 we expect over 25 million mailboxes round the world on Exchange. We never did that before."

What Martinez and her colleagues are selling, of course, is based on services that Microsoft traditionally sells to the corporate world for use on IT networks.

And what happens when it crashes?

But, let's put this carefully, there's a difference in reliability requirements between a corporate network and a public telecommunications system. If your office network packs in on a Friday afternoon, you stop work and go home early. If the phone system goes down around the city, people are likely to die.

And the traditional telephone industry has made the most of this. Is it fair? "That has been a challenge," admits Martinez, "but it's primarily perception." She challenges the assertion that there is a threat to reliability, but she recognises the assertion. "We fight it relatively easily," she says. "We find it all the time, but we have case studies that prove differently."

Some telcos are reluctant to be named, she shrugs, but she can think of one company running an eight-terabyte database of call data records on Windows — "They have the whole Microsoft backend," she adds — and another operator that has build a complete voice system on Windows.

Meanwhile the company has been promoting its vision of the service delivery platform, going to the heart of the OSS/BSS in new generation networks. "Web services are at the core of the ability to do things," she says. "We call it the connected services framework." And Microsoft has become a prominent member of the TeleManagement Forum, where OSS/BSS standards are discussed.

Getting the message out "takes a lot of energy from our team", she adds. "I don't believe you can win every religious discussion," but she believes Microsoft is winning many of the battles to be accepted in the heart of the telco.

Meanwhile she has an economic case to bring forward: "a 30% better total cost of ownership". If there's an initial reluctance from a traditionally-minded chief technology officer, this is a business proposition she and her colleagues can take to others in the C-suite, the chief marketing officer, chief financial officer, the chief executive officer.

"It means you can put hosted messaging, IPTV and other services on the system and then you can sell them as a value proposition." That 30% comes from the scale benefit of using systems that are produced in vast quantities for corporate users. Martinez continues the theme. "Data centres operate more efficiently with our technology."

Into the digital home

At the consumer end of the network, Martinez says that "the telcos are super-exciting about the whole digital home idea". Microsoft already has products such as Xbox and its Windows Media Center. "There are more announcements over the next year," she says. "all these products are coming together into an integrated strategy."

Fine, where the penetration of PCs and advanced games is already high, but what about the rest of the world? According to Martinez, Microsoft is evolving a special strategy for developing and emerging markets. Telcos themselves can be channels to deliver PCs into the consumer market, combined with broadband services "in the same way that you would bundle a cellular phone".

Microsoft is working with one operator which has already delivered "several thousand PCs combined with broadband connections" into the market, "and we're working very closely with many operators around the world". It is "a great partnership", she says: "We benefit and they benefit. We use their retail presence to drive penetration in the market."

One of Microsoft's most visible forays into the telecoms market has been in the area of IPTV, where it has worked through what is almost a sub-brand, Microsoft TV. It's clearly taken longer to get this sector going than Microsoft expected when it announced a number of user companies back in 2003.

In the US AT&T — the former SBC — is the most advanced customer, says Martinez, and Verizon has just launched services, as has T-Online in France, the local subsidiary of Deutsche Telekom.

"It's a programme that will take a few years to deliver," says Martinez. And meanwhile the very idea of IPTV is changing. "The user experience of on-demand TV is not very good," she admits. There is an opportunity for more services to be delivered: "It's more about on-demand that broadcast applications," as well as about "presence on your TV" — the ability to watch the same thing as a distant friend, yet exchange voice and text messages via the system. "We see this will provide an opportunity for operators," she says.

And operators are beginning to recognise the opportunities from targeted advertising, she notes, as well as interactive advertising.

The message is getting through to telcos, she feels confident. "At the executive level there is a realisation that they have to get really smart about how they compete," says Martinez. Operators are building plans for triple play and quadruple play offerings, and they will drive a significant restructuring of the industry.

And media and entertainment companies are also recognising what is happening, despite a degree of conservatism in the business. Many studio executives "don't have PCs on their desks", she smiles, and they still send video tapes around in taxis.

But January's Consumer Electronics Show in the US signalled a big shift, she believes. One major media company "brought its entire executive staff" to the show "to learn about the importance of the whole digital revolution". They wanted "to pick our brains about the technology", because of Microsoft's position in the business.

"The time is past when we have to prove ourselves," says Martinez. But Microsoft will always have to reassure companies that it is not trying to compete with them, she adds. "No, we say, we're trying to partner with you." GTB

Maria Martinez

  • Corporate VP of the communications sector at Microsoft, heading the company's efforts focused on wireless, wireline, cable, hosting and media and entertainment companies
  • Bachelor's degree in electrical engineering from the University of Puerto Rico
  • Master's degree in computer engineering from Ohio State University
  • Spent 12 years at Bell Laboratories, including development of disc storage systems and leading the development of Unix systems for symmetric multiprocessing and high availability
  • Joined Motorola as a VP and general manager to run the internet connectivity solutions division and the digital cellular infrastructure division. Under her leadership, Motorola launched the first CDMA commercial system in the world and established software as a significant source of revenue for the company's infrastructure business
  • Martinez served as CEO of Embrace Networks, a software vendor. She led the development of the company's technical strategy, launched the company's first software platform and developed its customer base