One year after Microsoft Chairman and Chief Software Architect Bill Gates unveiled Speech Server 2004, Microsoft (Profile, Products, Articles) says it is happy with adoption of its first speech recognition server. Some Microsoft partners who sell the product, however, say it has had a bit of a false start.

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When Microsoft proclaimed it would bring speech recognition to the masses, Gary Hannah, president and chief executive officer (CEO) of speech specialist Pronexus Inc., set ambitious goals for his company. He established a separate Speech Server division and "bet a significant part of the farm" on the new Microsoft product.

But when the Ottawa-based company closes its books on March 31, revenue for Pronexus' Speech Server business is set to come in at about a third of what it budgeted last year, Hannah said. "It is slower than we'd like," he said. He blamed a marketing effort by Microsoft that was weaker than he expected.

With Speech Server 2004 Microsoft promises speech recognition for the masses by making it available at lower cost and making it easier to deploy, manage, develop and maintain than competing products. Developers can add speech capabilities to existing Web applications based on Microsoft's ASP (active server pages) application framework by adding code based on XML (Extensible Markup Language) and SALT (Speech Application Language Tags) technologies. SALT competes with the VoiceXML standard.

Since its introduction by Gates in March last year, Speech Server has had to deal with some setbacks. The product shipped in July, a month later than planned, and JetBlue Airways Corp., one of Microsoft's banner customers, dropped Speech Server for an alternative just as the product launched.

"JetBlue is no longer implementing Speech Server," said Ryan Plant, a software architect at JetBlue. "We have a long-standing relationship with AumTech (Inc.), which has provided hosted speech solutions for us in the past, and essentially they were selected to continue working on speech-related initiatives for JetBlue."

Also, Pronexus and other Microsoft partners discovered that mostly large businesses, rather than the small and medium-size businesses that they say Microsoft initially targeted, are interested in Speech Server. That has forced the partners, both system integrators and resellers, to change their marketing strategy.

Intervoice (Profile, Products, Articles) Inc., another Microsoft partner, has also seen its target market for the speech product shift to large companies. The Dallas company in January realized that it was targeting the wrong market with Speech Server and is shifting its marketing strategy to target larger organizations beginning in March, said Michael Segura, director of Microsoft strategy and products at Intervoice.

"I think (Microsoft's) target market is substantially different from what they had originally forecasted," said Michael Segura, director of Microsoft strategy and products at Intervoice. He said that larger implementations were proving to be more fertile territory for both his company and Microsoft.

Intervoice is satisfied with the Speech Server business so far. "Adoption through the Intervoice channel is surprising and exceeding our expectations," Segura said.

Pronexus' Hannah is also optimistic about the future, especially since he has seen some changes on Microsoft's side. "The marketing engine is finding the right niche to go after, though it is still struggling. Over the last, probably 60 days, I have seen a difference. There seems to be, at the start of this new calendar year, an interest in listening to the partners," he said.

Microsoft denies that it marketed Speech Server to the wrong segment, sending its partners chasing after the wrong potential customers. "We have been consistent in focusing on both medium-sized and large organizations as the core customer market for Speech Server," said James Mastan, director of marketing for Speech Server at Microsoft.

Customer interest in Speech Server is strong, according to Mastan. He declined to disclose customer numbers, but said that Microsoft has invested a "significant amount of money and resources" in marketing the product. Over 10,000 evaluation copies of Speech Server have been distributed and many deals are set to close soon, Mastan said

"We are actively in the sales process of talking to well over 1,000 customers," he said. "What percentage will actually close varies, but it is going to be a significant number of them."

According to Gartner Inc., at the end of 2004 Microsoft held 2.7 percent of the market with about 4,000 phone lines, or ports, connected to Speech Server systems. The market is dominated by Nuance Communications Inc. and ScanSoft Inc., which held 34.5 percent and 42.6 percent, respectively, of the total 150,000-port market, according to Gartner.

Microsoft's efforts in this space are part of a strategic effort, said Steve Cramoysan, a principal analyst with Gartner. "It needs to be seen as part of a bigger picture play where voice access to information is going to become pervasive. In that scenario speech resources become a middleware utility on a server on the network somewhere. That is the game Microsoft is interested in," he said.

Speech Server 2004 is a first-generation product and it will probably take three to five years to mature, Cramoysan said. In terms of marketing, he feels Microsoft is focused on getting a few reference customers before volume sales. "Apart from their initial splash, their marketing has been fairly low key. It has been mainly around trying to build awareness within their customer base, rather than marketing in the public domain," Cramoysan said.

Microsoft launched Speech Server 2004 last year at the Avios-SpeechTEK conference in San Francisco. The company has a low profile at the show this year, which takes place this week. However, Microsoft will have a large presence at SpeechTEK in August in New York, Mastan said.

Before the August event, Microsoft plans to release a significant update to Speech Server. The update will add support for Canadian French and North American Spanish as well as other enhancements, Mastan said. Speech Server currently supports only English.

Meanwhile, Microsoft is touting customers who are in the process of rolling out Speech Server 2004. One of the largest, Gtech Corp., a US$1 billion a year lottery operator in West Greenwich, Rhode Island, on Tuesday plans to flip the switch on its first Speech Server pilot. The 192-port pilot is set to be expanded to 1,152 ports over the next couple of months, according to Michael Sax, director of global services technology at Gtech. The system will initially be touch-tone based, but in 90 days the first voice application should be live, he said. One appeal of Microsoft's product was that it would allow the company to migrate its existing touch-tone applications and experiment with speech technology, he said.

Speech Server made "good sense" for Gtech as the company has a lot of Microsoft .Net expertise in house, Sax said. Also, Sax found that Speech Server would cost about half that of a competing product based on the rival VoiceXML technology.

As Speech Server enters its second year on the market, customer education will be important, Microsoft and its partners said. Speech technology is still tarnished by the perception that it is expensive and that it does not work. As new customers help get the word out on the benefits of Speech Server, the product is bound to gain traction with large organizations, but also with small and medium-size businesses, analysts and partners say.

REFERENCES:
Microsoft sets Speech Server pricing, Mar. 24, 2004
Microsoft's entry to stir speech recognition market, Mar. 16, 2004