Skype Could Save Microsoft

I think that the Microsoft/ Skype deal is excellent for Microsoft and a brilliant way to get them back to being the premier provider of business services. I’m not going to debate if the purchase price was right (some analysts are saying it’s 4 times the appropriate level) or why Google or Facebook didn’t get Skype instead. If the deal goes through, this merger could catapult Microsoft into whole new position for the betterment of all.

One major reason for a possible home run for Microsoft is that this immediately makes them a global Telecom carrier. Remember that Skype is a software application that allows users to make voice and video calls and chat over the Internet. So calls to other users within the Skype service are free, while calls to both traditional landline telephones and mobile phones can be made for a fee. Microsoft immediately has a built-in way to cut into carrier’s voice traffic revenue.

Secondly, carrier revenue is all about applications. Just having the ‘pipes’ to deliver from point A to point B isn’t the main source of revenue for carriers- they get most of their money from the features and services that are added. So Microsoft gets the chance to go after the consumer space- first with gaming, bringing calls into games by connecting Kinect with Skype.

But the real game changers are in the mobile and business markets. In the mobile space, Microsoft has invested about $9.5 billion this past year in communications through its partnership with Nokia for $1 billion and the $8.5 billion Skype deal. What that means is millions of smartphones with VOIP. That's a low-cost alternative that plays to enterprise demands to cut communications costs. Windows 7 is a good operating system and the Skype introduction could mean handsets are introduced using Skype for calls. Skype could be built into Windows 7. This deal puts the mobile market into a whole new dimension. The carriers are going to fight tooth and nail to keep their business and this will be an interesting fight for how much Microsoft can take.

By far the biggest game changer to this deal will be in the business market. Decades ago when Microsoft first started rolling out their Office software products, there was no such thing as Internet or Skype. You basically bought a license, loaded it on computers and all your work stayed within the confines of the office building. The Internet changed the world forever including the ability to communicate information across borders. With Skype, Microsoft can leverage Office and Messenger as ‘added features’ to the Skype network and muscle out the carriers for this traffic. I think this is the biggest game changer opportunity.

Here’s where it will get very interesting. Lync is the Microsoft communications technology suite that integrates audio, video, and Web conferencing, so connecting with Skype seems a natural. The tablet revolution will also create a new opportunity for video-calling and embedding Skype has the potential to create a real market advantage for a new Microsoft tablet operating system.

How can Microsoft make money out of the deal? All Microsoft has to do is convince corporate users to subscribe to Skype once they’re able to integrate Skype into Outlook and other Microsoft apps. I think it’s a no brainer. However, it’s the execution that can kill this deal from saving Microsoft’s ass.

I just hope they don’t screw this up- it’s too good an opportunity to move the business world forward into whole new business dimensions.