Tuesday, May 12, 2009

Microsoft Cuts Include Response Point - One Step Backwards

Last week's cuts by Microsoft got lots of attention, but I've barely seen anything about the fallout for Response Point. I actually didn't catch wind of this until yesterday, and since then I've had dialog with a couple of Response Point team members to better understand what's happening.

I've been following Response Point for some time - such as here - and have always thought it was a great entree for Microsoft to serve the SMB voice market. There's so much at stake these days for owning the customer, and Microsoft knows it can't do this with software alone. They've invested a lot of time/energy/money to develop an SMB solution that bring the best of both worlds in terms of software and hardware, and that's what Response Point is all about.

In terms of public news about how the cuts impacted the Response Point team, I can steer you to two sites - their own blog, and the Mini-Microsoft blog. The latter post is more about the overall cuts from last week, but if you sift through the comments, you'll find references to Response Point.

My understanding is that Microsoft had to cut back support for initiatives that weren't delivering short term profits, and being a startup, Response Point clearly falls into that category. From all accounts I've seen, Response Point is not going away - they'll just have to make do for now, and support the current version as best they can.

Basically, this means living with Version 1.0, which launched in early 2008. They've been building their early momentum with this, but most people are looking to Version 2.0 to make Response Point a mainstream SMB solution. This version is more voice 2.0-oriented, and includes new features such as a softphone, Key System functionality, better branch office integration, and remote user connectivity. Unfortunately, the air has come out of this balloon with the funding cuts, as Version 2.0 was not slated for release until later this year.

So, development is now on hold until these cuts have been digested. Presuming Microsoft is performing better a couple of quarters from now, hopefully, they'll be able to revisit funding then and get 2.0 launched. Until then, the team needs to consider possibly launching a few core 2.0 features now to make Response Point more competitive, as the market is continually evolving.

This last point is the most troubling aspect of what these cuts mean, not just for Response Point, but Microsoft itself. We all know there's a huge land grab in play now for the massive SMB space, and there are tons of solutions to choose from. Response Point makes a lot of sense for SMBs who are Microsoft-friendly and want an easy-to-use solution. Furthermore, with so many new entries, buying from a trusted brand is an important comfort factor for an audience that is generally not that tech-savvy.

The problem facing Response Point is all the time they lose now to develop Version 2.0. This creates a bit of a vacuum that will quickly be filled by solutions that Microsoft will have a hard time competing with 6 months or so from now. Web-based offerings like Phone.com and Vocalocity are starting to find their niche, as are hybrid PBX/router solutions like Jazinga. And then you have the whole Open Source ecosystem, along with a growing variety of hosted, managed and cloud-based offerings.

These cuts also reflect on Microsoft, who simply had to make a business decision to adapt to current market conditions. However, it sends a message that SMB is not their top priority (which is probably true), but for the legions of vendors, VARs and developers supporting Response Point, it's a step backwards for what most would see as a winning strategy for Microsoft. Tough choices for tough times, and I do hope that the Response Point team keeps things moving forward, as I think their offering could be a major cornerstone for Microsoft's value proposition in the SMB market.


Anonymous said...

There are better SMB Windows Phone systems out there, such as 3CX Phone System. 3CX has all this functionality today. Also, Microsoft face an issue between OCS / Response point. I'd think that Microsoft is going to be putting their efforts into OCS, rather then Response Point

Anonymous said...

OCS is just 2 years behind Response Point. IF MS makes OCS for SMB, I hope MS will not only cut the price but also make OCS simpler. I hope the OCS team will get some great talents from the Response Point team so RP's simplicity can be trasnferred to the OCS.

Jon Arnold said...

Thanks for these comments, Anonymous. Both add more context to what this might mean for the market as well as MSFT's overall priorities.