New Microsoft CCaaS Offering: Threat to the Channel?

Microsoft has officially thrown its hat into the contact-as-a-service (CCaaS) ring in a move that the burgeoning CCaaS space and its channel partners are closing watching.

Microsoft at the Customer Contact Week conference this week in Las Vegas unveiled Dynamics 365 Contact Center. The cloud-based offering taps into Microsoft's OpenAI-based Copilot generative AI tool, pre-integrating "Copilots" into voice and text channels for contact center agents to use.

The standalone CCaaS offering will go live July 1, but Microsoft pointed to multiple businesses that will use it, including Mediterranean Shipping Company. Microsoft's own Customer Service and Support team has reportedly used Dynamics 365 Contact Center to consolidate from 16 different systems and decrease first-call resolution by 31%.

"Applying learnings and insights from our own Copilot usage, coupled with multiyear investments in voice and digital channels, Dynamics 365 Contact Center infuses generative AI throughout the contact center workflow — spanning the channels of communication, self-service, intelligent routing, agent-assisted service and operations to help contact centers solve problems faster, empower agents and reduce costs," said Jeff Comstock, Microsoft corporate vice president of Dynamics 365 Customer Service.

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Microsoft's Jeff Comstock

Microsoft is not new to contact center software. Microsoft Digital Contact Center launched in 2022. However, between then and now, Microsoft made a massive investment in OpenAI, whose generative AI capabilities have captured the attention of the world. Contact center software providers were already offering functionality like machine learning and conversational AI leading up to 2023, but the sudden popularity of ChatGPT set off a mad rush of contact center vendors establishing integrations with large language models (LLMs).

Now Microsoft is offering a CCaaS solution that it says is "Copilot-first." It will join a market of CCaaS/CX vendors that are all touting their embedded AI capabilities.

Telarus' Sam Nelson

"Microsoft appears to be integrating a large language model interface trained on proprietary data, similar to offerings from other providers," said Sam Nelson, vice president of CX at Telarus. "Their road map likely includes AI-powered assistants and chatbots, which could position them as a formidable player given their resources and market presence. However, they seem to be entering this domain relatively late compared to existing solutions, so they may initially be playing catch-up rather than setting new benchmarks."

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Microsoft CCaaS: Advisor Channel Impact

Lucas Salvage, whose technology advisory firm Kairos Data Communications consults on CCaaS offerings, said he believes Microsoft's new offering "will be disruptive."

“Microsoft has created a simple-to-use telephony platform, and with Microsoft Teams Voice leading the UCaaS space, I can easily see where an integrated CCaaS solution will be impactful," said Salvage, who, like many partners in the advisor model, does not directly partner with Microsoft for contact center. "That said, I also feel strongly that the major CCaaS brands are light years ahead of Microsoft in the CX space. While a Copilot solution sounds attractive, there will inevitably be gaps in their overall solution. To say I’m worried would be overstating; however, to say I’m carefully watching would hit the mark.”

Microsoft has cast a massive shadow over the larger cloud communications world over the last few years. Some point to the mass adoption of Microsoft Teams as a key reason why unified-communications-as-a-service (UCaaS) providers saw commoditization and moved to emphasize their contact center portfolios.

For Brent Wilford, senior director of CX and unified communication at tech services distributor Avant Communications, Microsoft's influence has an undeniable impact on the channel.

"Microsoft struck gold during the pandemic with Teams as a competing endpoint to traditional UCaaS, and they've reached 17 million end users since. It’s important to note that a vast majority of these are accessing Teams using other UCaaS providers, and Avant and our trusted advisors have assisted with many of these deployments. With that momentum in mind, it's clear that paying attention to Microsoft and its new product releases is paramount," Wilford told Channel Futures.

Many channel partners working in the agent/advisor model have added CCaaS to their sales offerings. 8x8, RingCentral, Five9, TalkDesk, UJET, Vonage and Genesys are just a handful of these providers.

Now Microsoft is waving its flag in the CCaaS space, and partners are trying to gauge any impact they will face.

Microsoft: An Opportunity for SIs

Channel Futures queried Microsoft about whether it will offer its Dynamics 365 Contact Center in an agent route to market. A comment from a Microsoft spokesperson touched on channel partners, but specifically system integrator (SI) partners.

“For SI partners with existing contact center capabilities and practice, there is an opportunity to extend services and implementation offers to include Dynamics 365 Contact Center. As Dynamics 365 Contact Center is released into general availability, interested partners will be able to learn more though the Dynamics 365 partners portal," the spokesperson said.

Select Communications CEO Jerry Goldman, whose company also sources CCaaS offerings in the agent/advisor model, said the impact of the new Microsoft CCaaS offering comes down to Microsoft's true intentions.

"I believe Microsoft is looking for ways to promote Copilot, and their CCaaS offering is a good way to do that. Do I believe that Microsoft will be aggressively pursuing CCaaS as a product offering? No. Contact center is at the center of most AI conversations in the B2B world. I believe this is Microsoft’s way of attempting to attract attention to Copilot," Goldman said. "With that said, all of us need to watch this closely, because if Microsoft did decide to seriously invest in a CCaaS offering, it would have a big impact on the channel."

Stephen Karachinsky, CEO of Microsoft Teams-focused MSP Ziro, has been warning technology advisors about Teams' growing footprint in the UC space. Four years removed from the COVID-19-inspired rush to UCaaS, many IT departments are consolidating into one the multiple platforms they bought, with Teams often the sole survivor.

Karachinsky sees a similarly significant impact coming from Microsoft's presence in the contact-center-as-a-service market.

"I've been saying for a while now how this industry is about to be disrupted in a significant way, and Copilot presents so many great opportunities to improve service and capabilities for customers," Karachinsky said. "Our customers are eager to leverage the Microsoft platform for a more integrated experience, and this move helps make that a reality for core aspects of their business."

Part of the evidence in Microsoft's favor is its overwhelming adoption in the areas of email, collaboration and office tools, Wilford said.

"With the amount of growth expected in the CCaaS space, it's not surprising that Microsoft has been making significant investments behind the scenes to come out swinging," he said.

However, he said Microsoft will need to demonstrate more than "reputation and flashy features."

"Success comes from a fundamental understanding of the needs of end customers, agents, supervisors and the executive teams who need this data to make impactful business decisions. With several well-established CCaaS players in this space, Microsoft faces a challenge in gaining traction in a new technology," WIlford said. "We don't have many details about pricing, integrations, or how it works in a non-Dynamics environment; yet, if the recent past has any guidance for those of us in the UC/CCaaS space, that guidance is: Don't sleep on Microsoft."