Today's New York Times has the "first" interview with Skype's new CEO Tony Bates. In the article there is the very direct message of how Skype see's its future growth coming from the Mobile and Enterprise usage. In the same New York Times edition there is the article on the F.C.C. and Net Neutrality. The two articles could not paint a more conflicting picture if someone had handed brushes and canvas to Monet and Renoir and said, paint that view. As a matter of fact toss in Degas and Cezanne, all from the era of Impressionist art, and the views would be even more strikingly different.
In the Bates article, his interview limited by the SEC S-1 filing about going public, mobile is viewed as a growth area, and points to the Verizon wireless agreement in the USA as an example of how Skype and mobile operators work together. Yet, in the F.C.C. article, it's clear that the cost of doing business with the mobile carriers means they make money and Skype sells it's soul for access. In an interview I conducted last February with former CEO Josh Silverman, the enthusiastic Silverman pointed out how working with the likes of Verizon got Skype "closer" to the handset manufacturers than they ever could have sooner, as Verizon's leverage with Motorola, RIM, etc. would speed up handset adoption. So while it did help with an initial number of handsets and provided inner working knowledge to speed up application development, Skype's efforts to innovate in mobile were thus hog-tied by what Verizon wanted, (i.e. no Wi-Fi calling on their devices-as the NY Times points out) further supporting the weaker F.C.C. Net Neutrality position towards wireless Internet. In essence, the framework of the Verizon deal, did more to seal Skype's fate than staying the fierce independent, and now they have to message around it.
In fairness, Bates inherited that thinking, and now has to live with it. He also inherited thinking about the Enterprise, and how that's the business market that will grow Skype's fortunes, just like he inherited the Silverman desire for a Windows like look and experience within the Skype client on the Mac (an abortion in its own right that is being fixed.) That giveaway on the point of Wi-Fi ends up be nicely countered by the T-Mobile and Cisco right now with a UMA solution announced recently that provides a very easy solution, and embraces the existing enterprise buyer, while also giving Cisco's Call Manager one more leg up over Shore-Tel, which has yet to deploy the Agito Networks solution they acquired, as the Cisco-T-Mobile carrier relationship helps further cement the reality of the concept of UMA/FMC.
So while Skype now has the "endorsement" of Verizon, for the other three major carriers in the USA, Skype remains an over the top play. So while Skype provides a user a better solution set, they still yet lack the other carrier's "endorsement" and thus with the pending net neutrality laws, runs the risk of being "blocked" or needing to be paid for. That's something the more draconian mobile operators in Europe did for a while, but now are loosening their belts when it comes to VoIP over 3G. They can begin to do that because as their network capacity and speeds increase, they are also seeing they can manage their networks better, with technology from companies in the wireless eco-system, which enable the mobile operators the same kind of packet level management now used by their wireline brothers in law.
After watching a presentation a few weeks back on Microsoft's Lync, their unified communications platform, I find it hard to fathom that Skype's got a snowball's chance in hell to best the Redmond giant. Microsoft, like Cisco, already has the IT departments' permission to be inside their network, and what's more, works with all the same equipment providers Skype would like to be "partners" with. What's more Microsoft's relationships with the likes of AT&T, Verizon, Level3, Global Crossing and the rest of the International telcos gives them a line of defense that Skype has to cross. That line of defense is, would the carrier rather work with the company that wants to reduce their margins and take business away from them, or really work with someone who only is interested in selling the solution, not the services itself. To go one step further, the Skype-Avaya partnership likely hurts Avaya in this area more than it helps, because of the application of the "enemy of my enemy is my friend rule" in reverse. That means, the friend of my enemy, is now my enemy too, so while Skype trumpets the success of having a deal with Avaya (both are Silver Lake invested companies) the competition to Avaya (Cisco, ShoreTel, NEC, Panasonic, etc.) can all yell and scream to their carrier buddies--"why do business with Avaya? Why help them sell?" as all Skype wants to do is play take away, even with the dangling of some token SIP trunking minutes as bait to the carriers.
Be not mistaken. The big bucks for carriers comes from the enterprise. The second chunk comes from consumers paying for landlines on a monthly basis, that require little, if any real care and feeding other than moves, changes and installation. In the middle is where Skype should be focusing on growth, and that the Small Business person, something TMC's Tom Keating has recognized around the launch of FreeTalk Connect. Why should Skype focus on the obvious and very reachable market, vs. going upstream? Well for the same reason eBay buying Skype was a bad idea. The audience. In the case of eBay, their sellers didn't want to talk to buyers. In the case of Skype the small business person loves Skype because it lets them compete with the bigger, more robust enterprise, but giving them parity and in some case nimbleness, something that with all the layers of IT management, policy and security, the enterprise folks treat as a foreign invasion. As such for Skype to be successful, and to make their IPO worth something for the future investors, vs. the current ones, Skype should readjust it's focus and work on getting more paying business from their core users-outside of minutes. That's where Skype's Jonathan Rosenberg's web services efforts come in to play. But the adoption of those services are far more easily seen by smaller more nimbler business owners and consumers, than by the gatekept enterprise size organizations, meaning it's easier to sell to the customer you already have, than to the one you don't.
Skype has the opportunity to keep being the disruptive force in the telephony and even Unified Communications sector, but to do that, they will need to start showing they can upsell to their existing users, put those dollars on the board, and then get the bigger game, the Enterprise on board, as the slower, longer lead buying cycles of those customers work counter the core DNA that built Skype. They don't like to buck the status quo, and the last time I looked, the traditional telcos were still the status quo. That shift is not hard to make, and if Tony Bates can move the rapidly growing Skype ship into that direction near term, those revenues that keep growing will look better and better to Wall Street, versus the dream that may never come to life of the enterprise being their best customer segment and thus Rosenberg's vision can become a reality versus a seriously misguided hallucination.