Initial thoughts on the proposed Skype/Verizon partnership
Bloomberg's saying that Verizon Wireless and Skype are planning to announce a partnership on Feb. 16 at Mobile World Congress. What does this actually mean for enterprise telephony, especially for companies trying to cut costs? Let's take a quick look from four perspectives: Verizon Wireless, Skype, AT&T and the enterprise telecom manager:
From Verizon Wireless' perspective, this partnership shows awareness of the following:
1) The increasing commoditization of voice minutes. Anybody paying over $50 a month for voice per employee in the enterprise world, is probably overpaying. This was a reasonable pricepoint just two or three years ago. However, with pooling, rate plan optimization, effective contract negotiations, and software monitoring solutions (including real-time visibility), companies focusing on voice cost reduction have been able to slash this cost by 30-40%. As this trend continues, Verizon sees that the future is in 4G networks, data-driven services, fiber, and cloud-based applications. (Now if only they would do something about those text-messaging charges, though usage of instant messaging clients can help here, as well)
2) Verizon's willingness to pursue creative destruction to increase end user value. It is difficult to sacrifice a cash cow such as wireless voice. However, Verizon has seen the writing on the wall. Their divestiture of wireline business in May 2009 and continuing job cuts on the wireline side other than fiber show that Verizon is serious about transforming from a telecom company to a wireless and fiber-driven company.
3) Focus on the network, not on a legacy voice infrastructure. Bringing in a partner that will drive data traffic through a voice-based application shows additional commitment to the future, rather than simply hanging on to the past. With this partnership, Verizon's commitment changes from connecting calls to the need to support higher levels of application performance for Skype. Frankly, this is where the value is for Verizon; providing a reliable pipe with high levels of geographic coverage. But it's no longer about sheer bandwidth, either. Increasingly, as more and more applications travel wirelessly, Verizon is going to need to provide more optimized application performance for the partners that are associated with Verizon service. As a voice-based service, Skype is going to fall into this category. Although I believe strongly in net neutrality and that the traffic should not be prioritized, the ability to which Verizon can support and improve the application performance on the wireless carrier network will provide an important strategic differentiator even as Skype becomes available on other competing carrier networks.
From Skype's perspective:
1) This partnership provides a new channel for voice services. With 500 million users, Skype isn't challenged to create its own network of end users. However, by providing this additional option, it definitely provides users with a significant new ability to use mobile Skype. Considering Verizon Wireless' 91 million customers, this may also represent a new growth opportunity.
2) Aggregation of cell phone and softphone. The idea of PC-based telephony is great as a Swiss-army knife aggregation of communications capabilities on the PC. However, the handset is currently the device of choice for phone calls and will be for the near-future. Skype's ability to grab as many handsets (regardless of office, home, landline, wireless, or other options) is the key to increasing the importance of Skype as a primary communications application that can be used for mature business communications as well as the consumer base that it already supports.
3) Increasing opportunity to create consolidated communications based on end-user preferences instead of top-down iron and hardware. Similar to the story of cell phones in general, Skype is a technology that has infiltrated the enterprise because of overwhelming end user demand. However, the previous inability of Skype to work with entrenched or traditional technologies has limited the adoption of Skype in the business world. As a company, Skype is embracing opportunities that Google Enterprise and Apple are missing by pursuing these partnerships. By doing so, Skype now has the chance to become an interstitial application that brings disparate technologies, modes, and communities together rather than simply be a stand-alone application. Although that stand-alone communications application has been successful, Skype now has an opportunity to take on a more challenging role in integrating communications capabilities
And what about AT&T, which always comes up in conjunction with Verizon Wireless? There are a couple of interesting observations that this partnership brings up.
1) AT&T already supports Skype on WiFi, but not on 3G. Although Skype is currently working on a Skype client for AT&T phones, it will be interesting to see if AT&T can take advantage because...
... iPhone support has congested the AT&T network in multiple key metropolitan areas. Despite network quality comparable to Verizon in many metropolitan areas, ATT network reputation has suffered with the support of iPhone, which is well known for its unoptimized use of data compared to Blackberry and other mobile platforms. AT&t has made the choice of pursuing the revenue with Apple at the cost of losing brand equity and reputation for its network.
2) Although it's always hard to quantify brand equity, there's also an operational and tactical concern. Depending on how taxed the network really is, the iPhone may prevent AT&T from quickly providing new network-based services because current network capacity is already congested. If this prevents AT&T from taking advantage of Skype or the future of cloud-based computing for mobile phones or new location-based services and video-based services, it will quickly become a disadvantage as end users demand newer and more interesting capabilities.
So, how will this affect the enterprise telephony world, which is what I cover?
What's next? Skype has been hitting the enterprise market hard since splitting off from eBay, with increased PBX support and focus on enterprise communications. Given the nature of wireless and mobility, native support on a number of Verizon phones will bring Skype increasingly into the enterprise.
However, to be a true business solution, Skype will need to start aggregating this usage through management systems that can track user, endpoint behavior, bandwidth, cost, and archiving capabilities that match corporate needs for financial, operational, and compliance-based management. Once Skype can do this to leverage its own infrastructure and communications network of 500+ million users while meeting the needs of enterprise customers, it will have the opportunity to become a true enterprise solution.
I'll be covering these trends in greater detail throughout the year and look forward both to my continued conversations with all three of these vendors as well as the research that I'll be doing in these areas of enterprise telephony, unified communications, and telecom lifecycle management.
