How the Skype Deal Can Pay Off for Microsoft

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Microsoft’s deal to buy Skype for $8.5 billion is the largest acquisition in the history of the company. After reportedly outbidding Google and Facebook, Microsoft has a number of solutions that can potentially benefit from this acquisition. But does Microsoft have the right strategy?

Skype Has Terrific Exposure

Skype has almost 700 million registered users globally, most of them using the free chat, voice and video services from PC-to-PC, or from one Skype account to another. However, many users also purchase voice-minutes, or Skype-credit, for making calls to regular phones and mobiles or sending text messages.

Skype also has solutions for businesses, such as the Skype Manager, a tool to create accounts for employees, allocate credit and assign features; and Skype Connect, which provides connectivity with SIP-enabled PBX‘s, allowing businesses to use their existing phone system to make cheap Skype calls. Skype already has apps available for mobile platforms, including Android and iPhone.

Microsoft communication products

Microsoft, on the other hand, launched last year a cloud-based unified communications system. Microsoft Lync is a comprehensive business communication platform which includes features such as Instant Messaging and Presence, Audio, Video and Web Conferencing, Mobility and Enterprise Voice. The voice capabilities provide a centralized call system, phone features, supplanting corporate PBX‘s, enabling video chat and unifying other communications systems of a corporate environment. Essentially it is a software based VoIP/SIP PBX that can run on a standard Windows server.

With its mobile Windows Phone platform, Microsoft has big ambitions in the mobile domain as well. Several handset manufacturers have already incorporated Windows Phone into their smartphones, including the HTC HD7 and Samsung Focus. Windows Phone has received relatively positive reviews and appears to be a serious alternative alongside Android and iPhone, perhaps especially after Nokia announced its plans to incorporate the Windows Phone platform as its primary smartphone platform.

How can Microsoft benefit?

So how does the Skype acquisition benefit Microsoft from its current position? From the perspective of the Lync communication platform and Windows Phone, there are several interesting strategies Microsoft can pursue.

  • It seems likely that Microsoft will integrate Skype business features with its Lync communication platform. With this strategy, Microsoft will enter the domain of the communication service provider, i.e. not only offering business grade communication platforms, but also by providing communication services, the stronghold of Telcos and VoIP service providers, including Skype itself. This will enable businesses to make low-cost calls using their Lync platform with features like integrated billing and account management.
  • Microsoft will provide a close integration of Skype into its Windows Phone platform. Hotmail and IM integration will be a given, and users will be able to send IP- SMS messages directly from their Hotmail account – similiar to the current Skype client. Users will simply choose the account they are calling from and see in real-time the cost of current phone call, and a myriad of other possibilities will be enabled.

The Skype acquisition, although expensive, can provide Microsoft great leverage. Not only does Skype have a huge market penetration that Microsoft can exploit with tight integration to existing solutions, but Skype already has well established processes and billing mechanisms that Microsoft can use for up-selling and cross-selling while entering the communication business both for individuals and corporate markets.

Olafur Ingthorsson is an IT professional in Reykjavik, Iceland who writes about cloud computing at Cloud Computing Topics.

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7 Comments

  1. Josh Robbins

    I hope that Skype will still be free because they just spent 8.5 billion!

  2. ^I'm pretty certain they wont change it. Cause it would make no sense to lose millions of customers just when they paid 8.5b for these customers.

  3. One of the great benefits of Lync Server is the propietary audio/video codec the use. They adapt bandwidth depending on the WAN links capabilities and support greater packet loss. This will give a better QoS to the Skype user.

  4. exasa tin epikinonia me to skype den mporo na miliso dia foretika mipos kserete alo tropo epikinonias me videoklisi voithiseteme.