The Skinny on Skype

— April 10, 2007

When it first arrived in 2003, pundits dismissed it as an interesting little technology that might create a modest splash in the consumer space. Since then, Skype has quickly evolved from an easy voice over IP (VoIP) alternative for the masses to a tool used by a lot of small and medium-size businesses to pull together mobile teams and reduce or eliminate long-distance telephone charges. In less than two months, the service claimed more than 1.5 million downloads of its software and 100,000 simultaneous users on any given day.

Today, it is not unusual to see nearly 8 million people "Skyping," with many using the video and file-sharing capabilities that have been added. And while consumers are the primary users of Skype, smaller companies have begun using it as a customer-facing tool, signing up clients and suppliers to provide an added level of personalized service. Skype's developers have also added a business-minded PBX link that allows companies to handle up to 99 simultaneous Skype calls.

While the climate couldn't be better for VoIP services, some analysts are skeptical that Skype's user numbers can easily translate into a sustainable business model. A relatively small percentage of Skype's more than 136 million customers actually pay for the service by subscribing to additional products such as SkypeIn and SkypeOut, which provide links to the traditional phone world, says Frost & Sullivan researcher Linda Starr.

Market researcher In-Stat notes that small business are drawn to inexpensive solutions such as Skype, though larger business and enterprise users may go for more corporate VoIP solutions from companies such as Cisco Systems and AT&T, which wrap more business-level security around their products.

Working to further its appeal to business markets, the company launched a Skype Certified Business program that tests and recommends Skype-compatible equipment such as Bluetooth-enabled headsets from Plantronics. Most any headset, speaker or add-on device will work with Skype when plugged into a computer's sound port, since the PC and its software handle the connections and compatibility. However, Skype-certified devices allow users to see when a person may have logged off or a connection has dropped. With the USRobotics speakerphone, for example, a tiny LED light flashes red or green to show if a Skyper is there or has dropped into the VoIP ether.

Earlier this year, wireless solutions provider NetGear became the first to offer a Skype-enabled wireless phone that is pre-loaded with the VoIP software and works without a computer over standard WiFi networks. The SPH101 has a built-in color screen that shows Skype buddies and contacts that are online, functions exactly like computer-based versions of the software and can be used to forward calls to mobile or landline phones or to another Skype user name (via SkypeOut).

Other companies chasing the Skype-hype include Creative Technology, which has a Skype-compatible Webcam; Japan's Buffalo, which has a keyboard with a built-in Skype handset; and Sony, which joined the parade with its Vaio MouseTalk mouse and Internet phone.

More Skype-enabled and compatible equipment is expected soon. USRobotics just introduced a Skype-compatible desktop Dual Phone that sells for about $90, and a Danish electronics company announced a similar device that is coincidentally called the DualPhone and sells for a little more than $200. Lawyers from both sides can use their respective phones to call and argue about possible naming conflicts. //

Tim Scannell is the founder and CEO of the Massachusetts-based consultancy Shoreline Research.


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