Transcript for Microsoft to Acquire Skype - UCStrategies Reaction

Jim Burton: Welcome to UCStrategies Industry Buzz, this is Jim Burton and we have some buzz today. The UCStrategies team will be following up my comments about today’s big event.

Today, Microsoft bought a verb and a very important verb—that is in the way of Skype. This is going to change a lot of things in the marketplace. A lot of us have been wondering how Skype would enter into the business market with their current product portfolio, and the answer is it will be Lync. At least that is my interpretation. But someone predicted this would happen 20 hours before the actual announcement, and that’s Dave Michels, so Dave I want to turn it over to you.

Dave Michels: Thanks Jim. I am feeling really good about Microsoft and Skype getting together. I think the two companies together – well, I think Skype fills a lot of holes for Microsoft. Lync is—I’ve put it out in a few different posts before—the Lync client is actually almost functionally identical to the Skype client. The technology behind them are totally different, but from the user perspective these technologies are very, very similar. And what’s been happening in the UC space, in the enterprise space, is that we have been talking about things like presence and productivity and what a big difference it makes in multi-modal communications and the consumer space is already known this with Skype. A lot of people don’t even realize that Skype doesn’t have voicemail as part of its core operation, because you never need it. You call people when they are available. And this is the same message that unified has been saying. But enterprise and the consumer space are two very different islands and Microsoft is supposedly all in the cloud and the days of packaged software are moving away and Microsoft is trying to become a cloud provider. And if they can bridge the gap between Lync and Skype, they’ll have the first and probably only enterprise-class UC solution that can communicate to six hundred million users out there in the world rich communications- wise, IM, presence, and the whole gambit. They are trying to convince CIOs that Lync is different than a PBX and being able to say that six hundred million potential consumers and individuals can reach you with a rich presence is a pretty strong value proposition.

So I am pretty excited about it and I also think it's a huge play for Windows mobile, because one thing the Android environment has going for it is if you are a Google user, you put in your Google credentials and you have your calendar, your email, your contacts and everything’s working for you. iPhone and Windows mobile users are a little more complicated and do more steps. Without the 365 and the ability to put in a user ID and password and have everything come down, plus voice-based communications and presence – it could be a really powerful answer for Windows Mobile if they integrate Skype into Windows mobile.

Jim Burton: Thanks Dave. Let’s open it up to the rest of the team. Who would like to go next?

Nancy Jamison: This is Nancy. I like this one a lot because Microsoft has so many other assets that they can connect with this, Kinect being one of them. I will be really interested to see what they are going do. I mean look at the Xbox Kinect; look at all the video cameras we have out there with consumers. I think there is just a tremendous potential for them if they do this well, as a follow-up to what was just said, to be able to open up enterprise class to the generic consumer base and be the first ones to really do it. I admit I was surprised, I didn’t see this one coming, but I think it has a lot of potential.

Jim Burton: Russell Bennett, I know you are writing an article on it right as we speak, what are your thoughts?

Russell Bennett: Yeah I am, Jim, and I am not going to steal my own thunder, but let me just say that I do know this is something – integration with Skype, anyway – is something that Microsoft has been considering for a long time and I was even part of those discussions. It never happened for a number of reasons, but I have written in other papers that I think that federation between the consumer UC space and the enterprise UC space is huge and the opportunity for enterprises to connect with their value chain of suppliers and distributors, even if they are small companies or even if they are consumers, is massive for the adoption of enterprise UC. And now I think that Lync by itself, ignoring all the other potential synergies in Microsoft, is going to gain an enormous benefit from this deal. So this is a major coup, and I am sure that CEOs in other companies are probably kicking themselves real hard right now.

Michael Finneran: This is Michael. I agree with you wholeheartedly, Russell. Looking at the mobility space, we’ve seen the consumer products just leapfrog past what we are getting in the enterprise. So I think Microsoft’s potential to learn from what Skype has popularized is tremendous. But Nancy, you got it right as well, it all gets down to execution. Skype is a verb, but Microsoft is an adjective. An adjective that means clunky and prone to crashing, so if they can actually deliver a functional product – but I disagree somewhat with Dave in the wireless space. It's iPhone 7 now that they are on, but the idea of extending Skype into the wireless is predicated on the mobile operators’ willingness to see their voice traffic revenues migrate to something else. And they have shown absolutely no interest in doing that up to now. Certainly in the wired space and the ability to link all these elements together and link as a verb in that case, as well, is going to be a real bonus. I think this has the potential to be something really big.

Marty Parker: It's Marty Parker. Just to comment on what you were saying and extend it into some other benefit areas. We talk about the mobile devices, it's interesting that I have had Skype on my Blackberry for several years now and many others have that client on their mobile devices. It may well be that Microsoft will use that Skype experience to solve some of their lagging performance in putting mobile clients out for Lync. So I can see some real cross pollination there.

The other two things I would like to comment on; one is that we talked a lot about the appeal to consumers and the consumers using Skype, which I do and many other do, it's a great home application that has been far ahead of Cisco’s effort to put home personal video into play, but I think it will end up being a very powerful business-to-business device. Most of our clients have communities outside their firewall: their customers, their suppliers, their partners, and they want to bring those people into the communication fold for projects and supply chains and sales and support. And engaging them through federation or engaging them by giving them licensed clients from Lync, may not be the best way now. It may be that bringing them in as Skype users will be a rapid way for Microsoft to expand its reach beyond the firewall for the purposes of business collaboration and business work flow. So I am going to be watching for that from a unified communications integrated to optimize business processes viewpoint.

The last thing I will say is that we have heard for some time that Microsoft has been trying to solve a particular puzzle and one of the reasons they gave that realtime voice – enterprise class voice on Lync – wasn’t going to be available with Office 365 from day one, was that they hadn’t solved the problem of how to deal with the carriers or how to be a carrier. Well Skype is a carrier, folks. They are the world’s largest carrier, or the world’s most global carrier, I will say it that way, and the largest too – Dave Michels is nodding at me here at INTEROP. So here they are suddenly able to be in that business. I would expect that they will keep the Skype business as a very separate subsidiary--very, very separate, so that Microsoft has the benefit of a close carrier of relationship, without becoming a carrier themselves with all the regulatory issues that would mean for the corporation. So I want to applaud the earlier comments and add that I think it's a great fit as well, just as Dave Michels said from the beginning.

David Yedwab: This is David Yedwab. I wanted to also jump on the Office 365 Microsoft Cloud connections to Skype. We are now talking about a cloud that touches just about every facet of our communications, be it business, be it consumers, be it the overlap between business and consumer, or B to Z, and as Marty was saying, the issue about how Microsoft is going to solve the service provider problem related to Lync enterprise voice and Lync voice in the Office 365 environment, is something that while it looks as though this might be a potential solution, I think we have to watch closely to see how it plays out over the next couple of months. That’s all I have for now. We are certainly living in interesting times.

Don Van Doren: This is Don. It's interesting. Marty, you talked about the B-to-B opportunities and the connections that companies have outside their businesses. Well, that certainly is also true of the B-to-C world. I think we’re going to see some very innovative ways that companies are going to start reaching out to groups of their consumers. And traditional methods of call center technology and contact centers in general, I think are fine. But I think we’re going to see some very innovative things coming out in the future and I think Skype will certainly be in a good position to leverage some of those kinds of capabilities.

Jason Andersson: Hi this is Jason. I wanted to add real quick on your comment on the contact center side, because I have been looking at that as well, and I think what Skype can add to Microsoft is on the reach to the consumer side. At this point, I think that’s a strong – I think all of the points that you mentioned are extremely right, but the opportunities in the customer service space are tremendous, allowing a company to identify who their customers are in real time and actually proactively communicating with them, even through a message or by calling them using their Skype accounts, is something that’s really interesting.

On the UC side though, I – from a personal perspective, I’m not as thrilled. I think we’re losing one player in the market. I think that Skype had some pretty interesting messages at the Enterprise Connect Show a few months ago and I was actually hoping that Skype could come into the space of a cloud-based UC so as to compete with Google and the Microsoft 365 unified solutions. And now one of the entrants are lost, so it's interesting and I would like be a fly on the wall on the IBM side right now, because obviously they’re not in this space at all. I think that’s going to be an interesting company to follow in UC and the communications space. Thanks.

Steve Leaden: This is Steve Leaden. I have a couple of thoughts here. One is that I see it as a power play by Microsoft to prevent Google, who was also very interested in potentially purchasing Skype, from further eroding Google’s now presence in the UC market. So I think it puts a stop gap there. Number two, it seems as though from what I could read, it is the single largest acquisition by Microsoft in its 36-year history. So it's obviously significant of them in terms of their portfolio. The interesting thing is that Skype actually has about eight million paid users, which again this is just not a freebie, they are actually acquiring a company that actually has revenue and some significant revenue at that. So from my vantage point it really adds a consumer and commercially-based voice and video over IP product into their space in the UC and effectively it's very, very strategic for them. So it's less about today’s announcement, what is the financial value of what was taking place today, and it was more about what is the future value of the integration of the current Lync product lines and the Skype product lines, as well as to your point earlier Michael, about the mobility space – how does that play and how are they going to further integrate the Microsoft Lync product with Skype in order to further create collaboration, IM, chat, presence, and document sharing amongst others and possibly these tools right into Windows mobile. So we will see how the product evolves, but it for sure I think is a game changer at large.

Dave Michels: This is Dave again. There are a couple of things that haven’t come up that I think are pretty interesting from the consumer side. One is the Xbox Kinect is currently the most successful consumer product in history and that thing has already been demonstrated to link with Microsoft Lync, which is more or less positioned as a home work teleworker-type of environment, but those Xboxes with Kinect could easily become Skype devices, as well, and I think that is a really interesting play for IBM and Polycom and Cisco trying to figure out how to get into the living room and I think that all of a sudden Microsoft has a very strong play, particularly if you combine it with Skype’s other partnerships with companies like Samsung that are already embedding it in televisions.

And the other thing is from a IM public network. If Skype becomes more or less a standard feature say of Office, across Macintosh and Windows users, I don’t know why people would continue with things like Yahoo, AOL, or Google for instant messaging and I think it has the potential to really disrupt the consumer-based IM networks.

David Yedwab: This is David Yedwab again, one quickie point about where the funds that Microsoft is going to be using to pay for this deal are coming from – they are out of the country – offshore funds, which lots of other major technology companies have cash available outside the US for acquisitions, and I wouldn’t be surprised if this signals more international acquisitions.

Jim Burton: Well, this has been a very, very interesting discussion. It's a very exciting announcement we’ve heard today, and I appreciate everybody’s input. I look forward to talking to you all again next week.