Spotlight on Operator Connect
by: Jon Arnold
Launched in March 2021, Operator Connect represents another key piece to enable Microsoft to become the hub of all workplace activity, and at face value, it seems like they’re well on their way. Teams is emerging as the dominant collaboration platform, and is an easy choice for Microsoft-centric IT teams. This level of integration for so many mission-critical applications makes Teams a very strong player in the UCaaS space, as there are fewer vendors to manage, and a fast time-to-market for deployment.
The telephony piece, however, is anything but simple. PSTN connectivity isn’t native to Microsoft, and providing an apples-to-apples experience going from desk phones and PBXs to Teams-based calling can be quite challenging. There are several approaches to this, and with Operator Connect, Microsoft is attempting to clear a path for operators to simplify the customer experience by allowing enterprises to manage Teams and telephony from a single pane of glass – the Teams Admin Center. As such, Operator Connect provides an end-to-end Microsoft solution when it comes to integrating telephony with Teams.
Beyond Teams, of course, there’s a diverse landscape of cloud providers offering UCaaS to help end customers modernize their communications capabilities, along with a fairly painless way to migrate from premises-based systems to cloud-based platforms. During the pandemic, cloud adoption really accelerated – as it was the best way to support hybrid work, a new reality that many businesses had to suddenly embrace. This was a boon to cloud providers, as they were in the right place at the right time to address these new sets of needs.
Teams, however, has been on an even stronger growth trajectory, and now presents a threat to this opportunity for cloud providers. As customers increasingly adopt Teams, cloud providers are being asked to support them in ways that undercut their UCaaS business. Some will go with Teams entirely, and others will want to standardize around Teams and maybe take less of their UCaaS offering. Either way, UCaaS growth will suffer, leaving PSTN connectivity as possibly the strongest card in their hand.
No cloud provider can take on Teams directly and win, so they must instead co-exist, and somehow make the best of the situation. Instead of swimming upstream, many cloud providers are partnering with Operator Connect and tying tighter into the Microsoft ecosystem. With so much momentum behind Teams, this game plan gives them exposure to a much broader market, and reduces the impact of losing UCaaS business to Microsoft.
Considering the Bigger Picture with Operator Connect
While the rationale here is sound, choosing this path represents a major commitment for cloud providers, with no assurances of success. The upside potential is clear, but operators must factor in downside risks, of which there are many, and here are three common ones to consider.
- Price of admission. Whether acquiring accreditation directly, or onboarding via partners in their Accelerator program (such as AudioCodes, NuWave, Ribbon, SIPPIO, etc.) – there will be costs and technical requirements, such as dual redundancy with Azure. Either way, for smaller cloud operators, the investment can be substantial, and could take a long time to get fully up to speed.
- Crowded marketplace. Currently, there are 72 carriers in the Operator Connect program. One could argue the club should be much larger by now, but that’s a different conversation. Still, for smaller carriers, it’s hard to stand out, especially when everyone is selling a fairly commoditized service. Conversely, better to be in the pond where all the fish are than not at all.
- It’s Microsoft’s world, and you’re just living in it. Aside from having long-standing customer relationships, cloud providers have limited leverage once customers elect to go with Teams. Microsoft generally gets the better end of things with partners – especially smaller players – so once going into Operator Connect, cloud providers will have to work hard to make this investment pay off.
While Teams has surpassed 300 million active users, the most recent public statistics from late 2022 show only 12 million PSTN users. That number is no doubt larger now, but overall penetration is quite low. Operator Connect is still fairly new, and expectations are much higher, but for the moment, it’s hard to imagine that many partners are making money yet. In time, that should improve, but for smaller operators, they are bearing most, if not all the risk so far, let alone the sunk costs to join the program.
Considering Options Beyond Operator Connect
Teams will continue to grow regardless of how many partners join Operator Connect, or how many users add PSTN calling. As telephony becomes more cloud-based, this market will become even more price-driven, making the pie ever-smaller for those 72 partners to share. That may not be an attractive long-term scenario, but for some operators, having a smaller slice of the pie is better than having none at all.
As such, this doesn’t bode all that well for some partners, especially those with limited capability to add value beyond dial tone. The situation becomes even more challenging for carriers serving larger enterprise customers where telephony requirements and integrations are more complex, and where Microsoft calling plans do not cover all the geographies served by the business.
This isn’t to say that carriers joining Operator Connect won’t be successful, but for most, it will probably take longer than anticipated. Regardless, some carriers may see this as a necessary move, both to keep supporting their customers, and to position themselves for growth in the Teams ecosystem.
It’s also fair to say that some carriers have had success from the start for Operator Connect – both because they have the right expertise to sell Teams and support telephony, as well as the fact that Operator Connect is simply the best solution for some of their customer’s needs. For these types of carriers, Operator Connect can be a game-changer, but for others – arguably the majority in the Operator Connect fold – the payoff will not be nearly as great.
For cloud providers, the main takeaway here is that Operator Connect has both pros and cons, but it’s not the only solution for integrating telephony with Teams. The good news is that you don’t have to join Operator Connect to ride the wave with Teams. For Operator Connect partners, this doesn’t have to be their sole telephony offering; it may help them maximize their business opportunity with Microsoft, but it won’t be the right solution for all their customers. For those considering Operator Connect – but have decided it’s not the right move, at least at this time – there are other paths for bringing PSTN service to their customers when they go with Teams.
One such path would be TeamMate’s PBX Connector, which is purpose-built for this scenario. This is a different approach that gives cloud providers the best of both worlds in terms of maintaining the telephony piece when customers go with Teams – as opposed to going all-in with Microsoft by joining Operator Connect.
Other paths exist as well, and cloud providers should explore all these options before deciding on Operator Connect. If you choose to go with any of these alternatives, it’s important to keep in mind that you can use these whether or not you join Operator Connect.
What’s most important is developing a complete strategy to support your customers when they go with Teams. Once you know the advantages for alternatives like PBX Connector – along with the telephony trade-offs that come with Operator Connect – you’ll be able to help your customers make a more informed decision about which path they should follow for telephony.
Jon Arnold is Principal of J Arnold & Associates, an independent analyst practice providing thought leadership and go-to-market counsel, with a focus on the business-level impact of digital transformation on the future of work.