The idea of Microsoft acquiring Skype has confused many people. Many are questions are being raised about the wisdom, price, and fit. But Microsoft grabbing Skype makes a whole lot of sense. Times are changing, and Microsoft can't sit back on selling packaged software. As we all know, it's a real-time, cloud-based world, and Skype fills numerous gaps in the Microsoft line with a single acquisition.
First, a little Skype review. Skype has well over 600 million users and recently crossed 30 million simultaneous users. There are few things in this world that have 30 million simultaneous users. Even better, Skype is a distributed and diversified set of users--distributed around the globe and diversified among Windows, Mac, Linux, and mobile users. There are very few applications that offer this type of diversity and distribution--MS Office is one near example.
Mobility is a key part of the Skype story and increasingly important part of any technology strategy. Skype Mobile is available for just about every smartphone and openly embraced by numerous carriers. Skype was among the first to support video from a desktop to an iPhone and its VoIP technology is supported on numerous 3G and 4G networks. Verizon has already embraced Skype Video on its 4G network.
In addition to mobile, Skype has a primary initiative to increase its penetration into business networks. Several new services from Skype including Skype Connect, a new business edition of Skype for Windows, and several services for business wrapped under the Skype for Business banner were all introduced over the past few months.
Back to Redmond. Skype fits right into several initiatives at Microsoft, which competes in both business and consumer markets. Skype can fit into Microsoft's goals for the cloud, Office, Windows, Windows Phone/mobility, Lync. Microsoft ubiquity, and probably more..
Microsoft is racing to the Cloud, or as famously reported by Ballmer, when it comes to the cloud, Microsoft is "all in". Office 365 is not a lite version, but fully functional. Moving Office to the cloud is only part of the battle. Google Docs for example integrates chat and presence directly into the documents. Google also offers click to dial.
Microsoft has been addressing all of this for the enterprise with Lync. In fact, Lync is very similar (in functionality) to Skype. Both offer presence/IM, voice, video, desktop sharing, etc. And like Skype, Lync is most effective between Lync users, which total nowhere near 600 million. Lync can "federate" with other networks, but this isn't trivial, nor particularly scalable. Lync is designed for organizations, not individuals--but Office 365, which includes Lync, is designed for both. One other point to consider is that no current enterprise solution for unified communications interfaces with Skype.
The first enterprise solution that does interface with Skype, and offers +600 million new users for b2c communications, will likely have a reasonable competitive advantage. And for the consumer world--they are already using Skype, but it is a standalone application. Integrating Skype into Office or Windows will separate it from the numerous alternatives such as Google, AOL, Yahoo, even MSN. Not even when you combine these are they bigger than Skype. Putting Skype into Office will be a huge blow to the other IM networks.
Microsoft has demonstrated some of its plans for Lync, specifically video calls to the home via Xbox Kinect, and smartphone clients for the iPhone, Android, RIM, and of course Phone 7. Again, these are all aimed at business users--home based or remote workers. Conversely, Skype is embedded in several brands of consumer devices from TVs to DVD players as well as smartphones. Xbox/Kinect is a very successful product for Microsoft, and making it Skype-ready will be simple.
Microsoft and Skype together can create a single solution for business and consumers--plus the ability for the two domains to communicate with each other--with rich communications that include IM or video. There are lots of alternatives (Avaya (One-X), Cisco (Umi), Polycom/IBM (TVs), AOL, Yahoo, and Google), but few that can cross the business and consumer domains.
Then comes mobile. Microsoft is clearly behind here, and won't catch up until it has some great apps on Windows Phone X. How about one of the most popular applications integrated directly into the OS including address book? The future of mobile is 4G--and that means voice calls will be VoIP--is there any other organization that has this nailed as well as Skype? Enter an Office 365 userid in a new Windows Phone and get email, Office and documents, calendar, presence, VOIP and video in one swoop.
Not a bad deal. Microsoft gets some top talent, a potential compelling feature for Lync--b2c, a stronger cloud presence, a potential compelling feature for Office 365, a hook for Windows Phone, a hook for Xbox-Kinect, a new revenue stream (including ad revenue), a stronger counter to Gchat/Google Voice, and an upgraded consumer presence solution. Skype gets a handsome valuation, a ticket to the enterprise, and a way to reduce staff.
The price, $8 Billion, seems a bit high, but it's evidently the market rate as Google and Facebook were reportedly also interested. Microsoft can afford it.
But there are some risks. First, Skype is a complex business. It is part carrier--they provide and assign phone numbers, and this is a business Microsoft does not know. Skype is regularly under scrutiny for everything from its cheap rates to lack of government eavesdropping options that invite regulation--globally. Plus Skype doesn't own all of its technology and some user defection is reasonable to assume. The key question is can Microsoft maintain the business while integrating it into its core products?
Exactly how committed Microsoft will be to some of Skype's initiatives is unknown as well--for example, Microsoft could lose interest in Skype's Mac and Linux versions? Will video chat on Android come as expected? Will the Skype app and service remain as familiar today?
But assuming Microsoft pulls this off, it's a huge victory for the company. As Microsoft moves to the cloud, it has to move away from its platforms. A Microsoft presence on Macs, iPhones, iPads, and Android phones is a big and logical shift.
