Summary Bullets:         

• Microsoft has yet to show that it knows how to make the most out of the opportunities from its acquisition of Skype.
• Microsoft has the potential to take voice revenue and customers from service providers, but regulators will be watching.

Microsoft’s $8.5 billion dollar acquisition of Skype has added a threatening new dimension to the software giant’s role in the communications market.  On the surface, the decision seems natural for a vendor that has strongly promoted software-based IP telephony as a better alternative to PBXs.  Services such as FMC and UC are proving effective as hosted solutions and showing a natural affinity for cloud-based delivery, which suggests that Microsoft is on to a winner.  The obvious model is for Microsoft to embed Skype into Lync/Office 365, and even potentially into future iterations of its desktop/laptop and mobile Windows operating systems.  Other vendors (e.g., BT’s Onevoice Anywhere solution) have demonstrated the cost-saving potential of driving voice calls over the corporate VPN via WiFi either through a softphone or a SIP client on a smartphone.  Microsoft could use Skype In/Skype Out to handle PSTN interconnection and keep all calls between Skype clients off the PSTN.  Skype can assign phone numbers and simultaneous call volume; Microsoft software can distribute basic calling or complex IP PBX functions (via Office365) throughout the organisation.  Office 365’s popularity among businesses as a solution attracts numerous carriers globally, including the majority of European incumbents and mobile operators such as Vodafone.  Skype will also strengthen Microsoft’s capability to offer voice- and video-enabled messaging and collaboration applications to business customers.

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