Source: saunderslog.com

While I was at VON I was reminded once again that platform strategy is one of the most misunderstood business models in technology.  I dropped by the booth of one of the big name softphone vendors to have a chat and find out what it would cost to license their SDK, which was the primary offering they were pushing at the show.  As software developers, we think it would be interesting to more tightly integrated Iotum’s boomerang with a softphone, and these guys certainly get the mindshare. They seemed like a good candidate.

Except that they have taken a deep dive into the well of insane business models. 

I was told by their VP of Sales, that the entry price for the SDK was $300K.  Yes, it includes 50,000 distribution licenses for the eventual client, but the price to get in the game is $300K. Oi!

They completely failed to understand that they are in the platform game now.  Their product is not technology anymore, but rather APIs.  The software people pay for is simply a distribution channel to get their APIs into the market. The only way to win as a platform is to have the mass of software developers behind you, and the only way to win developers is to give the API to them for free.

The company that does this better than anyone else in the world is, of course, Microsoft.  The Windows 2000 launch is a great example.  Of the 5000 people who worked together to build and launch Windows 2000 (the last Windows launch I participated in during my days at Microsoft), fully 1100 of these people were technology evangelists.  These are guys who fan out into the market seeking out complementary technology providers in the ecosystem around Windows, educate them on the technology offerings, and at no cost (usually) provide development tools and assistance to get them on board with whatever API Microsoft wants them to use in the next OS.   Every time one of the 24,000 companies in the Windows ecosystem embeds a Windows API into one of their products it ensures the longevity of the Windows business, and gives Microsoft the leverage it needs to negotiate the best deals it can with the PC manufacturers who ship Windows on their PCs.

So, back to my point.  Softphones are platforms, plain and simple.  Microsoft’s Communicator has a rich API, Xten’s Eyebeam has a rich API, SJPhone has an API, and GIPS delivers an open source softphone built on reSIProcate with their sound system as well.  Softphones are not about being a substitute phone on a PDA or a desktop PC, or a convenient tool for you to use from a hotel room while you’re on the road.  They are the the platform integration point for the IP communications experience.

What that means is that there will be no more than two or three players who survive in this market.  Microsoft is going to be one of them.  The market will support one or two more, just to have an alternative to Microsoft.  One will likely be an open source solution, and that leaves room for one more. It won’t be the guys who are high on their own PR and think they can get $300,000 for an SDK.