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Wednesday, 15 August 2007

Skype: Can it ever be ‘business-class’?

Most comms business people have heard about Skype’s ‘free’ Internet phone service; many have used it. Ask them if it is ‘business-class’ and most will say no, citing the poor voice quality and security concerns. Until recently, I thought the same. Now I am not so sure…

I use Skype to communicate with business partners in this country, Europe and the United States a couple of times a week. I do so because I should use the technology I write and speak about for a living, and because it is cheap: Skype to Skype calls cost nothing (as I pay for my broadband link anyway) and the SkypeOut service costs very little - a one hour call to a US landline costs just £1.00 at peak time.

I like Skype’s simplicity. I like the choice of media: chat, voice and video. I like the multi-party audio conferencing capability. And even with four people on the call the voice quality is quite acceptable provided all participants are using one of the many Skype-compatible headsets or phones available: I use a Polycom Communicator, which is so good I voted it one of my products of the year last December.

But until a short while ago I couldn’t imagine how Skype would fit into the average small to medium business, or a larger enterprise organisation, both of which use communications as a means to an end, rather than the end in its self. I felt it wasn’t suitable for such users because the voice quality can vary if the end-point equipment is not set up properly; there is no control over its usage and there are ongoing concerns about security. My intuition has been validated by recent research by Nemertes which suggest that 46% of the respondents to a poll of enterprise users have a policy to actively block Skype on their networks. And the French Department of Research has issued a recommendation to government departments to do the same. Just say ‘non’ to Skype!

In the face of such resistance why do I now think that Skype may well be able to upgrade itself to business class? Mainly because of the research I conducted for a client’s whitepaper on peer to peer (P2P) networking, which turned up a surprising amount of plaudits from Skype business users and suggested that there are a growing number of ecosystem partners developing software and products targeted at business customers. I would be the first to admit that this is not exactly scientific proof that Skype will become a valuable business tool, but read on and see if you agree with my assessment.

The first thing I did, as always when I start a research project, was to Google Skype - two business names so successful they have been become nouns: I often say “can I Skype you at 3.00 pm” - and got an astonishing number of returns: 213,000,000 in all languages which is a big number for a company that has only been around for 5 years. Microsoft throws up 564 million returns but is over 30 years old now, and in its last fiscal year had revenues of over $50 billion, compared to Skype’s estimated $285 million in the last reported four quarters.

The vast majority (some 90%, according to the company) of its revenues are from SkypeOut, with the remainder from SkypeIn, Voice Mail and Pay per Lead services. Most of this money comes from consumers though the company’s own research suggests that some 30% of the installed base are business users, though it is suggested by some industry pundits that most of these are individuals who have installed the software on business computers without their IT department approval. And up until now most Skype ecosystem vendors have made their money by selling headsets and phones to consumers - including the bizarre Spyke the Skype robot phone.

But now there is a growing constellation of Business to Business (B2B) ISV’s and hardware companies such as VoSky (which makes a PABX to Skype gateway) and StoneVoice, with their SkyStone Cisco CallManager to Skype software, looming over the horizon. From here on in it seems there will be money to be made selling Skype equipment to businesses. The more B2B companies with an economic interest in Skype’s penetration of the business market, the more likely it is to happen.

Leaving the wishful thinking of comms business marketing managers to one side though, it is the sheer numbers of users that leads me to believe that Skype will succeed as a business tool. It has been downloaded over 220 million times. There are some 9.2 million users online at any one time. But it is mainly because its IM/chat, audio conferencing and video telephony features make unified communications a need-to-have rather than nice-to-have capability. And we all know that UC is the next great business comms revolution, which the giants of the industry will ensure succeeds - it is in everyone’s interest that Skype becomes business class, and I think that it will.

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