BUS 599 Case 1
Summary
Niklas Zennström and Janus Friis were the ones who established Skype in the year 2003. They played a role in the introduction of VoIP software which was reliant on the P2P architecture, it presented no issues with firewalls, it offered high voice quality and quite significantly it was at no cost. It is through this manner that Skype has acquired a major size of clients and has reached great heights in terms of its market position. It is later that they began offering premium SkypeIn/Out services which brings lots of revenue as noted in North America in addition to hardware facilities with the help of associates.
Skype’s Vision, Mission and values
In reference to the Skype’s website, the vision is as follows: “Skype is the global p2p telephone company which will change the world of telecommunications by offering its customers worldwide first class calls for free”. The mission of the company is to some extend integrated into its vision. The main objective or mission is to offer calls at no charge between Skype clients and the cheaper calls to from landlines (AboutSkype, 2012). Moreover, Skype desires to issue advanced communication opportunities and high quality connections. Skypes values are dwelled on offering quality services and customer satisfaction.
Current situation, Competition and Competitive Environment
The main transaction that took place for Skype is the acquisition by eBay at about $2.6 billion in cash and eBay stock in addition to its able performance-dependent consideration. Skype has approximately 136 million clients who are registered and 8 million concurrent clients at peak periods and manages 7% global long-distance minutes (Table 1: Maistre, 2007). Skype has introduced new software versions that compose new features for instance video calling, voicemails, chats, and messaging among others. Not long ago, the company has introduced SkypeOut in France at no cost.
Skype has begun providing business services among them conferencing, e-mailing among others with configuration in Skype Control Panel. It has started its API services to the public while similarly it has introduced the world’s first WiFi-VoIP phone in association with NetGear and is investing in wireless FON services.
Skype has however been restricted in a number of universities as well as research companies. The company has been dogged by a number of lawsuits from StreamCast and Net2Phone relating to P2P patent violations. Its software has been infringed on China.
Skype is one of the innumerable VoIP providers (Table 2). Its competitive strategy of is contrasted by the application of its technology. Skype applies the peer-to-peer technology which brings about a number of benefits to the company and clients in relation to cost savings. Moreover, Skype does not levy monthly basic charges or subscription costs and clients are not required to issue payment for the software. The software is very simple in application as well as installation. These aspects make Skype to stand out when compared to other competitors.
There are a number of competitors that Skype faces, and to the fast and intriguing development of Skype and SkypeOut a number of companies have started to offer internet telephony and VoIP services in similar markets and less costly calls like in Europe where it has grown (Malik, 2007 ; Hagstedt, Håkansson, & Thideman, 2011). Big players like Yahoo has not long ago presented its own voice calling VoIP service integrated with the newest version of Yahoo! Chat, MSN and AOL who are racing for shares. A number of small companies have come up to be part of this. Notable names include the Globe7, VoIP.Net among others. A number of the big companies offering these services offer free calls.
The increase in the competition has brought about a great emergence of internet telephony market on the basis of Skype (Wirken, 2012). Skype may no longer term itself as being at the fore front of the industry when there are a number of competitors getting comfort from the same. Skype is serious on publishing numbers of clients coming in but rarely does one see the numbers of clients who do not credit their account or apply the Skype service.
SWOT Analysis of Skype
The SWOT analysis is applied so as to integrate the valuation of the environment and the examination of the company’s internal resources and competences.
Skype’s strengths
The most notable strength on Skype is that the software and calls do not come at any cost. The software can be downloaded at ease and installed. It is softphone that can be able to do VoIP simply and at no cost. It has no additional settings which are to be applied and it has no issues with firewalls. Skype provides a number of services at no charge and other services at limited costs. Its clients are offered the ability to set up calls and exchange information similarly. This ease handles basically private persons that have no understanding of the technology put into it. Everybody is able to put it to use. Skype is a global network that provides global accessibility, dynamic and agility.
The quality of voice is of high quality that beats its competitors. Skype applies peer-to-peer technology which brings about benefits at charges for the company and its clients, considering that no charges for managing information are accorded. Skype applies its own proprietary protocols and encryption models to encrypt information. With regard to Skype this brings about maximum security level.
Skype’s weaknesses:
Certain segments of Skype’s strength are limited by their weaknesses. Skype’s proprietary protocol and secret encryption of information has brought about issues on security as there is no clue of how good or bad information is encoded. Skype does not adhere to the international standards; its protocols bring about incompatibility with a number of VoIP providers. There is no gateway from Skype to other services like PSTN and ISDN. This has led to high charges.
Skype does not offer emergency service calls. This hinders the significance of Skype for its clients. In the year 2005, the company’s CEO Zennström stated that the company will work with emergency companies to bring about solutions to this matter, till now no answer has been found or brought forth. Skype has issues with the quality of voice; there are delays, echoes, and interruption. Moreover there are issues that relate to other programs running concurrently. Skype similarly relies on a running computer and internet connection. The computer has to be running so as to set up or receive calls which bring about high costs in electricity and utilization of the computer.
The internet has grown to become very insecure to wander in. when a person uses the telephone with the computer, hackers are given the free will to get pry on conversations as well as spy on the computer and all the information in it. This is noted for businesses with secrets.
Skype’s opportunities:
VoIP is growing all over the world (Stadler, 2009). This based on the technical development, improved quality and the high level of broadband infiltration, which offers a ground for applying VoIP in a better manner. Basing the discussion on peer-to-peer technology, it has been attributed as being the future of VoIP and all of its companies that do not apply peer-to-peer are bound to fail in the future.
Another opportunity is the business arena. A number of organizations in the region of 30% make use of Skype. It has to offer information that is safe and relevant for the companies and therefore sets the basis for a tool of communications. It grows the client’s market target through looking into other groups. The phone company is getting into associations with mobile phone companies. Skype may be applied on mobile phones in public hotspots. The application of Skype in these spots as noted in coffee shops is bound to fasten the growth of Skype.
Skype’s threats:
There are however a number of threats in the external surrounding of Skype. A number of their competitors have a great client base. Moreover, the competition with VoIP is quite great and innumerable in terms of the companies that provide it. The companies issue improved services and standards that are open. Skype applies secret and proprietary protocols that no one has a clue of. This presents a great weakness for the company.
Skype is great threat to the telecommunication industry. The industry could do away with Skype. In a number of European states, the telecommunication industry offers internet access meaning that it may lock out Skype hence hindering its growth. Moreover, the German telecommunication industry is answerable to VoIP with its Triple Play – which is an integration of broadband, VoIP and television. They started transforming their circuitry to great speed of internet access so as apply the Triple Play. The company has a great pool of clients and this offers a great threat to Skype.
Recommendation
The high numbers of clients who are not satisfied and the constant increase of complaints on the company may bring about the subsequent drop of Skype as the leader in the industry. This may however be corrected if Skype puts in place a direct client service enactments which will be of much help to keep the clients base and may be even send a number of the competitors back below Skype.
Microsoft with the acquisition of Skype has to maintain the competitive advantage using its affordable cost service method. This will hence make it a low cost provider, niche market portions for instance B2B has to be done by another body. This business body would not be part of Skype rather it would provide business solutions majorly directed and keen on the B2B market without affecting the client base.
Skype is a flawless fit with Microsoft’s central vision to set out its client’s productivity and innovation through making it simple for them to communicate and work well as a team. With the acquisition of Skype and subsequent regulatory approval, it leaves an opportunity for a great number of people to connect and offer them exciting new modes of communication and form on computers, phones and through services like Office and Lync.
Appendix A
The chart shows the breakdown of Skype’s growth in 2006 and 2007
Table 1: Skype Registered User Growth 2006-2007
| Q1 2006 | Q2 2006 | Q3 2006 | Q4 2006 | Q1 2007 | |
| Registered users (millions) | 95 | 113 | 136 | 171 | 196 |
| Current quarter vs prior quarter | 27% | 20% | 20% | 26% | 14% |
| Current quarter vs prior year quarter | NA | NA | NA | 129% | 107% |
| N/A = Not Applicable | |||||
Table 2: Skype VOIP Traffic Volumes 2006-2007
| Q1 2006 | Q2 2006 | Q3 2006 | Q4 2006 | Q1 2007 | |
| Skype to Skype Minutes (in billions) | 6.9 | 7.1 | 6.6 | 7.6 | 7.7 |
| Year on year growth | NA | NA | NA | 46% | 11% |
| Skype Out Minutes (in billions) | 0.7 | 0.9 | 1.1 | 1.5 | 1.5 |
| Year on year growth | NA | NA | NA | 189% | 131% |
| NA = not applicable | |||||
Source: Lightreading.com
Appendix B
The graph shows the sum revenue of VoIP in the Northern part of America and it offers the position that Skype has in the growing market.
Source: North America Total VoIP Service Revenue
Appendix C
Source: GigaOM
References
About Skype. (2012). Introducing the World’s First WiFi Phones for Skype. Retrieved from http://about.skype.com/2006/07/introducing_the_worlds_first_w.html
Hagstedt, K., Håkansson, E., & Thideman, J. (2011). Corporate Strategy 2011. Retrieved from Microsoft & Skype: http://www.smi.ethz.ch/education/courses/corporatestrategy/Slides_AS2011/Microsoft_A
Maistre, R. L. (2007). Skype: Revenue Doubles, Growth Slows. Retrieved from Light Reading : http://www.lightreading.com/document.asp?doc_id=122229
Malik, O. (2007). In Europe, They Like Their VoIP. Retrieved from http://gigaom.com/2007/09/09/voip-in-europe/
Stadler, J. (2009). An Investigation into Skype Technologies S.A. Norderstedt: GRIN Verlag.
Wirken, D. (2012). A closer look at Skype s competitors. Retrieved from Article Garden: http://www.articlegarden.com/Article/A-closer-look-at-Skype-s-competitors/9480
