Skype Journal

Unbound Spiral: “Powered By Skype”

September 16, 2004 03:00 PM

Let's step back for a moment. Skype's business model is dramatically different to the traditional telecoms. For the most part all the hardware required to operate the network is owned by the individuals using the service. Thus unlike traditional telecoms there is no need to build out infrastructure, new users simply bring it to Skype. In that way it is similar to the Seti at Home project.

Increasingly I think of Skype's potential like a low cost electrical utility. Compared with telecoms which have had little innovation in handsets the electrical grid enables thousands of different appliances. Electricity is also similar in that it is “always-on” and you use it in real-time. The switch and control remains with the user.

A year ago Skype was just another IM client with a voice-centric bias and tremendous audio quality. People said no-one makes money at IM or in free telephony. I have quotes in my Skype Journal. A small few a year ago (including me) said that Skype was disruptive based on its architecture and audio quality. I believe the hidden learning now is more about evolutionary changes that may not look like much in the short term but in the end are quite revolutionary. Skype is beginning to rewire the whole way in which we communicate. It will extend to business processes and social interactions. It's also living proof that telephony is now just a software application.

Skype provided a few surprises over the last year. Against my early expectations it began to develop a multi-platform capability which is now emerging. In fact one year after launch they have versions for Windows, Pocket PC, Linux, Mac OS X, and soon Palm and Symbian. Less surprisingly SkypeOut launched and is now funding growth and Skype still has not offered premium services or provided solutions directed at traditional enterprise structures.

Their platform capability means that when they release an effective API just about anyone may be able to develop services that plug into Skype's data and communications network. Early DOS is a good comparison in this regard. Although there it was hardware, Skype is directing their assault at platforms. These platforms have long life spans and the operating piece they are carving out is underdeveloped. While Microsoft looks at Dell, IBM, HP, Toshiba, etc, Skype is looking at the platform suppliers as manufacturers.

So their strategy poses a continued strategy for both Telecoms and Microsoft “Windows”. Telecoms are threatened by the cost structure and the long-term challenge to their “numbering” system. While “Windows” will be challenged by Skype if the API is open enough because the incentive will exist to develop an “office” platform for Linux that integrates presence and availability and communication capabilities with documents and files. While LCS Live Communication Server will offer this capability it requires a central server and my guess is still a lower quality audio engine. A successful Skype gives new utility to a Linux desktop at significantly lower cost vs. Windows. If the API enables easy cross platform solutions then this market may explode.

So for communications “Powered by Skype”. What could kill the opportunity? If they think like a telecom they will be dead. Thus these are moves Skype cannot make.

  • They should not add the overheads and billing structure for associating landline numbers to Skype. Rather they should find a way to connect with users' current landline numbers. The BT communicator provides one example while other hardware solutions are possible. Integrating SkypeIn with my home phone or a mobile number reduces my risk while providing new opportunities to control my long distance costs. Skypers all want this. The challenge is to create a global solution not limited by current numbering.
  • Skype can't remain completely closed, although it can remain proprietary. It will in time extend an API so new services and markets can be generated around it. Presence will be the first item to be unbundled. Then with time “tagging” will enable the conversations and connections to travel with documents.
  • They can't ignore further enhancements to audio quality. Skype should introduce Stereo and 3D sound capabilities. While extra conferencing features are lower priorities, integrating Skype into gaming opportunities would enable Skype to access a younger audience that may help its transition to mobile platforms.
  • I personally think the current video / cam formats are not a big deal although it can add new information and begin to extend “presence” See this Earthlink example. Note how they use and integrate video into presence information. In the Earthlink example picture it is more about context, context aids communication eg has someone walked into the office, is there a meeting on, is he on the phone, or with his feet up, etc.