Skype and Microsoft? Well, apparently it’s more than just a possibility. There have been rumors swirling around a buyer for Skype for a week or more, but they’ve been just rumors. The possible deal with Microsoft is a lot more than that—Microsoft confirmed it at about 8 AM today. So now, the question is “why?” From what’s been said, the big reason appears to be the creation of a communications ecosystem built to envelope Microsoft’s gaming and mobile products, and I think it’s clear that it would be extended to Microsoft desktop products as well, and could even offer an attractive reason for hardware vendors to offer a Microsoft-based tablet.
Skype is two things; a community that already includes tens of millions of active users worldwide, and a technology that can create a “behavior-centric” communications framework around any activity that’s persistently interesting to users and that has a social dimension. Gaming is surely such an activity, and so is unified communication and collaboration for the enterprise. I think it’s clear that Microsoft is aiming at this, but I also think it’s clear that Phone 7 and Microsoft’s smartphone fate is tied up with this deal as well…and that’s complicated.
Technologically, this might be an interesting time to make a Skype-based play. Mobile operators are transitioning rapidly to LTE, which is pure IP. While there are ways to tunnel TDM voice over LTE networks, a quick migration of mobile users to LTE would mean that an all-IP calling community would develop quickly. That would call into question the whole IMS voice evolution because without much interconnect between TDM and IP voice, a lot of IMS is redundant. If you don’t believe that, reflect that Skype already inter-calls without IMS. So might Microsoft put Skype voice on its handsets instead of conventional voice?
It would depend on the operators. Voice services are clearly not going to be profitable in mobile any more than in wireline, but they do sustain some revenue from non-broadband customers and justify at least part of the investment in wireline copper loop. They’re also still a big source of mobile revenue, if one that’s clearly in decline.
P2P voice is the cheapest way to offer voice services, which is why you can offer free Skype. Given that universal broadband will create a universal framework for something Skype-like, it’s hard to justify spending bigger bucks to create another voice model. Yes, the carriers have low IRR and can win a race to the bottom, but their horse in a future-voice race is more likely to be P2P-based than central-mediated and server-based. Remember that signaling issues were what was supposed to have brought down Verizon’s LTE network. Why create more of it?
Another interesting news item is that David Yen, Juniper’s QFabric engineering ace, is leaving Juniper for Cisco, where he’ll take over a new business unit built around the data center and including the UCS server lines and virtualization and the cloud. This might, at one level, be an indication that Cisco is taking the data center and its strategic shifts more seriously, but I still have a problem believing that one person can be the catalyst to make a sales-driven company appreciate marketing and market strategy. There’s still a lot of Cisco cotton wrapping Juniper-bred Yen, and even Juniper seriously underplayed QFabric at the strategy level. Does David see that, and will he do something better for Cisco? It’s a hard role to have to play now, because little time remains to position Cisco’s assets effectively.
The Microsoft/Skype thing also puts pressure on Google, who after all was one of the companies said to be in discussion with Skype. Google Voice and Chat have been modestly successful, and Google now has to either concede the IP/UC space to Microsoft (fat chance!) or step up its own efforts here. The problem is that monetizing that kind of effort will be difficult unless Google can really involve outside partners. The timing of the Google developer event is thus problematic; it’s too soon for Google to have devised a strategy for Voice/Chat that would integrate with Android, and yet it’s now clear they’ll need one.