July 1999

BY RICH TEHRANI

“On June, 1, 1999, Intel Corporation and Dialogic Corporation announced that they have entered into a definitive agreement under which Intel would acquire Dialogic….” With this announcement, following closely on this spring’s news that Microsoft would be purchasing an interest in Dialogic and becoming directly involved in Dialogic’s CT Media platform, Dialogic once again set the CTI industry astir. What does this mean for developers? For hardware manufacturers? For enterprises considering communications alternatives? For service providers considering alternative platforms to hasten the rollout of enhanced services?Will the standards message reach Nineveh, or will there be much wailing and gnashing of teeth?

I am reminded somewhat of the story of Jonah and the whale, although with some significant differences. Jonah was told to go to Nineveh to preach, he refused, and he was swallowed by a whale. Dialogic, on the other hand, has been very much a part of preaching the open standards doctrine — along with other companies such as Natural MicroSystems and Brooktrout. Now Dialogic has been swallowed by a whale — a company that has been a major part of developing and promoting standards in the PC world. So what does the future hold for CTI? Will the standards message reach Nineveh, bringing prosperity and interoperability to the world of converged communications? Or will there be much wailing and gnashing of teeth?

Despite all the talk of replacing the PC, there is no doubt that right now the desktop/laptop PC is king. Everything from software to Web sites is designed with the limits and capabilities of a PC in mind: screen size, keyboard input, basic soundcard compatibility, etc. Even if IP-based communications didn’t promise to be cheaper and more supportive of enhanced features than circuit-switched, the ubiquity of the PC architecture and data LANs would be an attractive alternative for carrying enterprise communications. Witness the growing popularity of PC architecture and interfaces throughout the CTI industry: CompactPCI is on the rise, GUIs are everywhere, and client/sever designs are allowing businesses to react dynamically to changing software without completely exhausting their MIS workers with individual upgrades to every users’ PC in the company.

So in a field that is as promising as CTI and the convergence of voice and data networks, it really comes as no surprise that some of the big mainstream PC companies would be interested. Still, even I have to admit that it was a bit surprising to learn, just a few months after announcing a development/investment agreement with Microsoft, that Dialogic was being acquired by none other than Intel. Two giants in the PC world are obviously very interested in one of the giants of the CTI world, and these two announcements have given all of us here at TMC, as well as in the industry as a whole, food for thought.

A CHORUS OF RESPONSES
In an effort to “take the pulse of the industry” after this recent announcement, I canvassed key players on some general topics that would seem to be directly affected by this acquisition. Here are some of the responses I received:

How will Intel’s direct entry into the field of voice/data convergence at the board and server levels affect such things as standards and interoperability?

“Intel’s acquisition should be considered together with Microsoft’s licensing of Dialogic’s S.100 implementation. These two investments are likely to accelerate the impact of standards on the computer telephony market and trigger the emergence of new application segments. Microsoft and Intel can set de facto standards if the standards satisfy essential customer requirements. Their participation will certainly make the pie bigger for everyone.” — R. Andrew O’Brien, vice president of business development, Brooktrout Technology.

“This can only be good news for the standards and interoperability efforts that have been underway in our industry since the inception of the Enterprise Computer Telephony Forum (ECTF) five years ago. The goal of the ECTF is to bring about a common architecture for CT hardware, software, and applications. Intel’s significant experience and success with standards efforts in the mainstream computing industry can be leveraged to bring about the adoption of existing and proposed standards and interoperability efforts in the CT marketplace more quickly and successfully. This will translate into more products being available sooner to resellers and, ultimately, to the end user.” — Sandra Rivera, president, Catalyst Telecom CT Division.

“By acquiring Dialogic, Intel gave a lot of credibility to the convergence of voice and data. Convergence will happen, but this deal is going to make it happen sooner and more thoroughly. Intel is a formidable force in the marketplace, and standards backed by Intel have a lot more weight. HP, with its open strategy, is delighted to see the converged world moving to an open, standards-based environment.” — Francois Gaullier, CT/IT program manager, Communications Industry Business Unit, Hewlett-Packard Company.

“We understand that it is Intel’s objective to drive standardization of communication server platforms in much the same way that they have done for PC platforms and to ensure that this new, high volume server segment is based on Intel-built silicon. We believe that as they roll out their product strategy… it will be open to third-party hardware and software content which extends its value and reduces time to market for customer solutions. As Intel’s new products appear, NMS will offer the highest performance, highest value extensions to those products. We believe we will have solid support from Intel in doing so because we will enhance the value of their offerings.” — Brough Turner, sr. vice president of technology, Natural MicroSystems.

“Parity Software is excited about the opportunities created by Intel’s and Microsoft’s investments in Dialogic. We expect that this will accelerate the penetration of the CT Server into the marketplace.” — Bob Edgar, CEO, Parity.

“The Microsoft-Dialogic agreement that was announced in March of this year, and subsequently, Microsoft’s joining the ECTF has been a great boost in furthering the ECTF interoperability specs. Now with Intel signing up, how can anyone doubt that widespread support of these standards will happen very quickly?” — Roger Reece, vice president of marketing, Syntellect.

“This announcement can be seen as a vote of confidence in moving toward interoperability and standards.” — Leon Adams, manager DSP strategic marketing, Texas Instruments.

What kind of an effect might this acquisition have on competition in the fields of CTI, Internet telephony, media processing, and communications convergence?

“The effects will be two-fold. First, Intel’s and Microsoft’s investments are likely to accelerate the convergence of voice and data communications, combining voice, fax, and data. Their participation will speed the shift from proprietary, closed systems to standards-based open systems. Second, for both technology providers and applications developers, Intel and Microsoft will raise the bar for competitors in horizontal, mass-market applications. Their focus on meeting the needs of large segments of the market will increase the technology baseline. Competitors will focus on meeting the unique requirements of market segments whose needs are not horizontal. Technology providers must provide unique benefits that are not standard in the microprocessor or OS. Application vendors will see certain applications become commoditized, while meeting the specific requirements of enterprise and carrier users will be richly rewarded. Competitors who deliver basic, commodity capabilities will have a tough time surviving.” — R. Andrew O’Brien.

“If manufacturers were sitting on the sidelines before, or had a ‘wait and see’ attitude, they are getting a wake-up call. Any manufacturer who is still trying to get mileage out of their proprietary designs and architectures, while dabbling in the open, standards-based space, should be motivated to accelerate their standards-based product introduction schedules. This will benefit customers, who want richer business solutions and applications to choose from, and developers and resellers, who want to leverage their investment and expertise across a wider range of products and platforms.” — Sandra Rivera.

“After the investment by Microsoft last March, this new development is one more indication that computer telephony is hot. Dialogic, who is already the leader in this marketplace, will get more resources and access to facilities that were before beyond its reach. This acquisition will make it more difficult for Dialogic’s competitors to remain a threat, especially in the multimedia or video space. Intel, who already has key components for desktop multimedia, will be able to deploy these more successfully now.” — Francois Gaullier.

“Intel has been clear that their principle reason for this acquisition is to gain in-house telephony expertise so they can capitalize on the emerging opportunity for communications servers. In the short term, the acquisition is likely to create some uncertainty, as Dialogic will undergo a substantial, yet to be determined change to their product and technology roadmaps and their go-to-market strategy. There is likely to be a set of Dialogic customers and partners that will see Dialogic-within-Intel as less focused on supporting their particular requirements, or even as a potential competitor. This will mean new business opportunities for NMS — and for our existing customers as well.

In the long term the acquisition is likely to stimulate market growth for enterprise CT solutions that are standards based. If Intel can reinvigorate the enterprise CT market by making it easier to buy and deploy communications servers with some basic level of functionality, that’s going to increase opportunities for suppliers of more advanced, high-value extensions to that functionality. We see ourselves and our partners as the long-term beneficiaries of Intel’s sales and marketing muscle.” — Brough Turner.

“It will encourage competition at the levels where real value is added for the users of such products by helping to ‘commoditize’ the low-level enabling technologies. For example, it will probably help SpeechWorks spend less time worrying about echo-cancellation and more time improving the usability of applications using speech recognition over the telephone.” — Mark Holthouse, senior vice president of operations, SpeechWorks.

“For software/application developers such as Syntellect, it will be great. We have embraced the new interoperability standards with our support of CT Media. Software/application vendors will be forced competitively to get out of their proprietary architectures. For voice hardware vendors, the competition will get tougher. Most of them have already adopted the H.100 and H.110 specifications as well as the other hardware-related standards. But they have never had to compete with a giant like Intel. Imagine CT server motherboards with voice bus connections and ‘Intel Inside’ stickers on the outside of the boxes.” — Roger Reece.

What effect might this announcement have on the accessibility of CTI/computer telephony solutions for business and other end users? Is this a step toward making these products more readily accessible to end users? Will the perception of the reliability of such systems be increased due to Intel’s name recognition, thereby increasing demand?

“This will certainly make converged applications based on standards-based open systems more accessible. Among the many benefits of this investment will be Intel’s and Microsoft’s attention to enabling their present channels, both OEMs and VARs, to deliver these electronic communication applications. For end users, reliability is a requirement. Intel’s participation won’t change that.” — R. Andrew O’Brien.

“This is probably where we will see the biggest impact of this announcement. The two obstacles that have kept our industry from growing at a faster pace are: a) lack of end user demand, and b) lack of reseller-ready packages. Intel has made end user demand creation an art form with their ‘Intel Inside’ message. If they carry this strategy forward into the CTI space, we will benefit from the increased awareness and demand. Taking it one step further, once the standards and interoperability efforts take hold, more software developers will be able to leverage their efforts across different manufacturers, components, and platforms. As a result, there should be an increased availability of solutions for resellers to sell. Any concerns regarding the robustness of CTI developments platforms will also diminish with Intel’s SHV server line being highlighted as a stable platform upon which to develop and deploy mission-critical business applications.” — Sandra Rivera.

“I will not be surprised if some of the components of the CT architecture migrate, slowly but surely, into the core of the servers or PC clients, making it more readily available and more ubiquitous. HP, who announced last month its CT platform aimed at ISVs and VARs developing CT applications, is very encouraged by this aggressive move by Intel. I know we are in the right market at the right time.” — Francois Gaullier.

“An Intel focus on high-volume communications servers will be good for applications developers and ISVs. This in turn will enable new solutions for businesses and end-users…. Intel’s name will help, as will CompactPCI technology. However, the reliability of the operating system software is perceived as being as much of an issue as specific hardware choices.” — Brough Turner.

“In the same way widespread integration of modems helped fuel the explosion of Internet access, increased availability of plug-and-play CTI components will help speed adoption of applications which depend upon them. And, certainly, a ‘software PBX’ with the key hardware components supplied by Intel will increase its perceived reliability and safety in adopting such systems.” — Mark Holthouse.

“The end user will absolutely be the winner here. They will have greater accessibility at lower prices with far easier integration. Intel has to be looking at the in-network market. Eventually the entire legacy of proprietary switches will be replaced. This means that reliability is key, and the on-premises end users will reap the benefit of the newer more reliable technology. Everyone wins, except the vendors who continue to stay in the proprietary world.” — Roger Reece.

“Name recognition depends on what types of products are being developed. Dialogic’s products are mainly for OEMs and developers rather than end users directly. And Dialogic products have Texas Instruments DSPs in them. But whenever your create more momentum in a new vector, it builds confidence throughout the market.” — Leon Adams, Texas Instruments.

Will this announcement inspire other interesting maneuvers by leading vendors? Will competition for the hearts and minds of developers continue, albeit on another plane?

“Already we’ve seen some, with TI’s acquisition of Telogy. But this interest on the part of semiconductor manufacturers is not new. Intel’s investments in Native Signal Processing several years ago were similar efforts to expand the microprocessor’s communication capabilities. These capabilities are now commoditized. When was the last time you heard a vigorous debate over the quality of speech playback using ADPCM? Years ago. The CT industry has commoditized that functionality, although it is delivered on PC add-in boards. Competition for the hearts and minds of developers now is based on how technology providers can help their customers get innovative new applications to market quickly and at low cost. That is not about chips; that is about software tools and utilities, technical support, and myriad other capabilities that make system delivery and development faster and lower cost.” — R. Andrew O’Brien.

“We have been in a consolidation mode for the past two years in the CTI industry, and this agreement will be certain to keep the merger and acquisition activity high as players jockey for position. We will definitely see more of these types of announcements in the coming months, and manufacturers will be more aggressive and creative in the way they approach, attract, and retain customers. In particular, we should see a greater level of awareness and understanding on how to approach the data reseller community and recruit VARs into our industry. There has been a lack of understanding with regards to what is required to lower barriers to entry for resellers, but Intel and other manufacturers experienced in the channel and two-tier distribution models will help grow the market for CTI solutions by working with their value-add distribution partners (like Catalyst) to bring more ‘reseller ready’ solutions to the market and make it easier for VARs to be successful in responding to the increased end user demand.” — Sandra Rivera.

“This announcement will fuel the CT marketplace. I wouldn’t be surprised if this industry witnesses more mergers and acquisitions. Companies that want to compete in this industry will need to acquire Dialogic’s competitors. Dialogic created the market by enabling full-fledge CT applications on open PC platforms at a fraction of the price of dedicated, proprietary systems. This open market will continue to deploy based on standard components.” — Francois Gaullier.

“Just as Intel has competition in building enterprise servers, they will have competition in building communications servers. Intel, and their competitors, will focus on high-volume market segments. NMS will continue to concentrate on being the premier provider of high value, high performance enabling technology to major OEMs, whether they use Intel-built servers or competing platforms. Our customers and prospects require a customizable portfolio of products and services, motivated by their need for rapid time-to-market, full feature sets, and competitive life-cycle costs. These needs are even more pressing today, and we bring unique offerings and advantages to our target customers.” — Brough Turner.

“Vendors of third-party boards and middleware may try to position themselves as the interoperability glue between Sun/SPARC/Solaris and WinTel platforms for CTI, and this may appeal to certain segments of the market. Sun and its other partners will of course try to take advantage of any delays or confusion the merger creates in Dialogic’s existing market. Linux remains the dark horse here, and it will be very interesting to see whether the combination of Dialogic and Intel chooses to support…the Unix side of the market.” — Mark Holthouse.

PROPAGATING THE WORD
As you can see from these responses, there seems to be agreement throughout the industry that this acquisition and the deliberate entry of Intel into the voice/data convergence space is good for the market in general. A few things remain to be seen:

1. How long will it take for Intel and Dialogic to begin to function as one, and will there be some “churn” among traditional Dialogic customers in this interim?
2. Will Intel seek to incorporate voice processing functions (traditionally performed on DSP chips) into their main processors?
3. Is this strictly a WinTel play, or will Unix be involved here as well?

For now anyway, the industry appears hopeful about this announcement. Even as giants like Microsoft and Intel enter the market with their enormous name recognition, they potentially broaden the market and would seem to bring a sense of stability and deliberateness to an area where many of the buyers may have been overwhelmed by the seeming endless array of choices and functions. In this age of chaotic change, the industry as a whole will certainly appreciate any prophet who can come along and give them a clear idea of where the future lies.

Rich Tehrani welcomes your feedback at rtehrani@tmcnet.com.

In an announcement somewhat related to Intel’s acquisition of Dialogic, on June 2, 1999, Texas Instruments said that it will acquire Telogy Networks, unifying one of the best know DSP silicon manufacturers with the designer of Golden Gateway, an embedded VoIP/FoIP gateway software. We spoke at some length with Leon Adams, manager of DSP strategic marketing for Texas Instruments, regarding both their acquisition of Telogy and Intel’s acquisition of Dialogic.

Leon was positive and upbeat about both activities, pointing out that Intel and Dialogic traditionally have addressed the upper layers of the OSI model, whereas Texas Instruments addresses the lower levels of this same model. “We address the physical layer,” he said, “whereas our customers address the upper layers and work down.” He also pointed out that many Dialogic products currently contain Texas Instruments’ DSPs. “We really expect that the DSPs will remain in those systems,” he said.

Additionally, Leon pointed out how the acquisition of Telogy was a logical combination, since both companies address the component subsystems that are then plugged into or embedded in various types of equipment: gateways, routers, remote access servers, and so on. DSP processing is also fundamental technology in vocoders, echo cancellation, modulation/demodulation, etc.

The union with Telogy means that Telogy’s software can be even more closely integrated with TI’s reference designs, allowing DSPs with embedded software to be designed to fit specific market segments more closely.

As for unification of the two companies beyond their products, Telogy will be a wholly owned subsidiary of Texas Instruments. Leon suggested that, while the two companies will be “tightly coupled” in the DSP area, they will also remain independent entities in many ways — certainly sharing development strategies and reference designs, but hopefully retaining the nimbleness of smaller companies able to react more quickly to market initiatives and directions.

Having returned from CTI EXPO in D.C., I can tell you unequivocally that the interest in voice/data convergence is at frenzied levels. Attendance and exhibit space has doubled from the first-ever CTI EXPO in Baltimore only one year earlier. Over 16,000 attendees came to CTI EXPO in just two days of exhibits!

Cisco, Nortel, Lucent, Microsoft, and IBM had mob scenes at their booths. Attendees included a good mix of resellers, end users, service providers, and call center decision makers — all trying to absorb the latest in convergence technology and learn how they can benefit from it.

In fact, CTI EXPO just may have been the busiest show I have attended all year — and I attend donzens of datacom and telecom events annually! We have already received many testimonials from attendees, conferees, and exhibitors, which we have posted at www.ctiexpo.com/testimonials.

Perhaps the largest consistent crowds I have ever seen at any booth at any show were at the live multimedia blended call center co-sponsored by  CellIT  and TMC, as well as at CellIT’s own booth. In two days, over 1,000 attendees went through CellIT’s booth! CellIT had 13 agents continuously calling potential attendees and inviting them to the show. In two days, these agents made and took more than 11,000 phone calls.

The call center was assembled in only two days and CellIT and their partners deserve a great deal of credit. Many call centers with legacy equipment take months to get up and running with less functionality than CellIT’s multimedia center. All other call center vendors take note: there has never been anything like this in the call center market — ever.

As if a call center environment is not a tough enough environment to test in, the entire demo was done on a trade show floor. Many vendors can’t even get a demo to work correctly in their booth. CellIT demonstrated 11,000 call completions! Any demo that works on a trade show floor should work really well in a more controlled environment like your office.

If you think you missed the boat by not being at CTI EXPO in D.C. — you’re right. Don’t fret though, we have received many requests from attendees who want us to have another multimedia call center in Las Vegas. We have already started working with CellIT to build an even better, live, multimedia call center for our upcoming CTI EXPO in Las Vegas, December 7-9.

SIX LEARNING CENTERS
Just one of the many unique features of the next CTI EXPO will be the six brand new learning centers:

• CT Media: CT Media is a Microsoft/Dialogic/ECTF standard that is used to construct a computer-telephony (CT) server. Think of a CT server as roughly analogous to a database server. When a company installs a database server such as Oracle in their organization, many applications can take advantage of it through open interfaces such as ODBC. CT Media abstracts hardware in the same way that Oracle abstracts the database. In both cases, applications can access core server functions through a variety of function calls. In this learning center, you will witness many applications adhering to the CT Media standard and witness the power of truly open telephony.

• Development/Testing: Developers have many options when building CTI applications — from picking the right DSP resource boards to the right de-velopment environment. Once you’ve developed your application, you should make sure to test it thoroughly with the latest generation of testing tools from companies like Ameritec and Hammer. This learning center will allow developers to get a grasp on the latest development technologies.
  Linux Telephony: Linux and open-source software have become the love of Webmasters and network administrators alike. (For a great article on open source in CTI magazine, please see the March 1999 Horizon article)  Advantages of open-source software include the fact that armies of programmers worldwide can modify and augment the original source code. In this way, the original product evolves and morphs much more quickly, and becomes more useful than if the software was under a single company’s control. Linux telephony is a relatively new concept, but many vendors are betting that Linux is exactly the OS they need to make their telephony solutions a success.

• Next-Gen Call Center Technology: E-commerce without human interaction is like shopping in a department store with no one to help answer your questions. The latest generation of call center and Web integration products succeeds in marrying Web sites to call centers, so that your customers can always opt for a live agent to help them before and during their purchases.

• Enhanced Services/Network CTI: This is the newest field for service providers to explore — a field with unlimited new product opportunities that customers need, and service providers can profit from. Internet call waiting, Web-based unified messaging, follow-me services, and broadcast Internet fax are just a few of the next generation of IP-based enhanced services we can all look forward to using.

• Wireless CTI: Palm-based computers will eventually merge with cell phones, and IP will be the universal wireless networking standard. In addition to telephony, IP wireless devices will allow you to access e-mail, the Web, GPS, the latest stock market developments, a database of contacts, etc. Come see how far wireless CTI technology has come and where it is headed.
  

We have so many new things to introduce at CTI EXPO in Las Vegas, December 7-9, that I can’t even begin to cover all of them here. Please sign up for the show for free today at www.ctiexpo.com and save $25. For further information, you can always visit our Web site at www.ctiexpo.com for the details.