Microsoft's Skype Acquisition: 10 Burning Questions4:00 PM EST Wed. May. 11, 2011
Now that Microsoft's pulled the trigger on an $8.5 billion acquisition of Skype, the potential Microsoft-Skype pairing has raised at least as many new questions as answers.
Microsoft, it seems, has a lot to make clear about how it plans to integrate Skype, how it plans to make Skype-led opportunities available to the channel, and why it made such a dramatic statement -- it's Microsoft's largest acquisition ever -- right now. Here's a look at the issues that are emerging.
As soon as the $8.5 billion number was confirmed, the chorus of tut-tutters hit a steady crescendo: did Microsoft overpay? It's a hefty sum for Skype, which as many observers and Microsoft investors noted Tuesday, is a company that not only lost money last year, but is also a service many users enjoy for free or close to free. Microsoft has a history of overpaying for acquisitions, too; its widely referenced 2007 buy of aQuantive, an online ad firm, cost $6 billion and is perceived as a flop.
"It's hard to absorb all the implications right now. I can not fathom how Skype got a valuation of $8.5 billion," said Gary Berzack, managing director and CTO of eTribeca, a New York-based solution provider. "There could have been a silent bidding war and Microsoft bought it to stop someone else from getting it."
Microsoft and Google: arch-nemeses. Google: said to be interested in acquiring Skype, just like Facebook and at one point, Cisco and others, were said to be. Google: gaining traction, albeit slowly, with Google Voice, its IP communications service and Skype competitor. Skype: major brand name recognition and hugely popular with consumers. Microsoft: badly in need of another consumer foothold, and a communications foothold. Buying Skype: solves both those problems, and puts a Microsoft product on any phone -- Windows, Apple, Android or otherwise -- that uses Skype mobile.
Signed, sealed, delivered as a big fat middle finger to Google? Sure seems like it. "Microsoft would never admit that," said Alan Weinberger, chairman and CEO of The ASCII Group. "But it makes sense."
It's been one issue with Skype since long before Microsoft came knocking on its door: Skype, despite usage by businesses the world over, isn't an enterprise-grade product.
"Skype, while having some nice communications features, is still a consumer-grade solution," said Steve Hilton, head of enterprise research for Analysys Mason, in a Tuesday note. "Enterprises don't want low quality communications services when dealing with customers. While enterprises will trade-off lower prices for lower quality, they could have purchased Skype solutions long ago had they wanted to save a few dollars (or pounds or Euros)."
As Ed Moltzen, CRN's Managing Editor, Test Center, pointed out in an analysis of the deal, Microsoft can now potentially embed Skype audio and video calling into as many Microsoft products as it sees fit, including Bing, Outlook and Web mail, and Office 365, Microsoft's well-reviewed suite of cloud-based office apps.
Windows LiveMeeting, Microsoft's conferencing platform, is another obvious choice. As several observers have noted, the potential integration there is enough to make Microsoft a more direct competitor to conferencing platforms from its UC rivals, particularly Cisco and its WebEx offering.
Microsoft, it's easy to forget, is a part-owner of Facebook, and thus will have some pull in the baking of Skype features into Facebook.
"Facebook with voice and video baked in would be a more powerful Facebook, and it will bear watching to see if a Microsoft-Skype duo becomes a trio with Facebook," noted CRN's Moltzen.
Skype has long had a tricky relationship with major telecom carriers, who see the placement of Skype VoIP services, especially on mobile devices, as a low-cost threat to the business that keeps them afloat. Microsoft will have a tricky line to walk now, especially since it partners with a number of carriers behind its Windows Phone platform and the devices that use it.
During a Tuesday press conference, Microsoft CEO Steve Ballmer simply said that Microsoft's partnerships with carriers for its Windows Phone platform will remain "fundamental."
How will solution providers make money behind a Microsoft-owned Skype, which is freely available to most users and on any number of platforms, and doesn't promise high-margin returns for VARs or much in the way of integration or professional services opportunities?
"I think the only way there'd be good money for us, because Skype is pretty open, is if they limit it and then create professional services opportunities to deploy it," said James Marsh, senior vice president of Carousel Industries, an Exeter, R.I.-based solution provider and Microsoft Gold partner. "But I really don't see any professional implementation money going to the VAR community."
"If you want to keep the channel healthy you have to go for hearts and minds with margin," said Glen Coffield, president of Smart Guys Computers, a Lake Mary, Fla.-based system builder. "You have to show us respect and stop throwing us bread crumbs."
Last fall, Skype went live with a long-anticipated formal channel partner program, intending to use it as an inroad to more Skype business in enterprise and commercial accounts. The ASCII Group's Weinberger, who along with several VARs met with Skype's channel managers several times to look at opportunities, said there was a lot of initial interest in the Skype program but not a lot of follow-through on Skype's part.
The problems Skype's channel program had are now Microsoft's problems, he said: is there real opportunity to make money other than slapping a Skype sticker on an integrated solution and being able to say "we have this"?
"Obviously the VARs would like to make a buck on it," Weinberger said. "So we'll have to hear how Microsoft is going to integrate this."
Microsoft CEO Steve Ballmer said during Microsoft's Skype press conference Tuesday that Microsoft will continue to support and invest in Skype clients on non-Microsoft platforms. That's key to getting Microsoft into competitors' sales through the back door, but many solution providers are wondering just how far that "support" will carry.
"Say I'm including Skype in an implementation, but the rest of the UC sale is all one of Microsoft's UC competitors, like an Avaya?" asked one solution provider, who requested anonymity. "They OK with that?"
Skype has relationships with a large number of unified communications and video companies with solid channel presences, not least of them Avaya, with whom Skype partnered on a two-phase integration starting last September. How will Microsoft look to limit or change those relationships? It'll be easier than others in some cases: LifeSize Communications, for example, has Skype video calling integrated into Passport, its portable telepresence system, and LifeSize is also interoperable with Microsoft Lync. And Avaya does integrate its communications solutions with Microsoft's desktop and business applications just fine. But it stands to reason a few existing Skype relationships will change.