Skype aims to persuade business users to install SIP for cheap global calls

Stefan Öberg: IT departments are not rewarded
for taking risks. It’s our challenge to communicate
with them

Skype has always had its own private VoIP system, which has given it good quality calls but scared many owners of business and other private networks, who were never sure what Skype traffic was doing.

Now Skype is launching a business-friendly service, but that means Skype must work hard to mend its reputation with network managers in enterprise and start — for the first time — some serious marketing.

Skype is announcing a new strategy focussed on business with a change in technology to allow enterprises to make and receive cheap calls via their existing PBX switching equipment.

The company — which has previously relied almost entirely on viral marketing to consumers — is considering ways of reaching and supporting business users and persuading corporate IT departments to relax their ban on Skype signals on their networks.

“To make a business offering, we will need a channel,” Skype’s vice president for business, Stefan Öberg, told Global Telecoms Business. “We realise there is some investment to be done.”

Skype will allow business users to programme their PBXs to route outbound calls via a new variant of its technology called Skype for SIP — “SIP” being “session initiation protocol”, a voice over IP system that Skype has so far avoided.

PBXs made by Shoretel and Cisco are already certified for the new Skype system, says Öberg, and Avaya is “in the pipe, and all the others. We are speaking to them.”

Companies will be able to sign up online to connect their PBXs into Skype, paying a flat rate of €4.95 a month for capacity for each simultaneous call, plus an advance payment for calls, rather like the existing SkypeOut system for consumer calls — with a similar prepayment mechanism.

Automatic top-ups

“You’ll put money on in advance and then burn through it,” says Öberg. Companies will be able to set up automatic top-ups.

According to Öberg, there is a “queue of 10,000 companies” that are interested in using the system, and others will be invited to register via the website.

Skype will start a campaign to educate IT departments about Skype — though unlike consumer-grade Skype, the new SIP version will operate from the edge of the PBX outwards, rather than on the internal ethernet network. “IT departments are not rewarded for taking risks,” says Öberg. “It’s our challenge to communicate with them.”

Business users will not be able to make outgoing calls using Skype names, but only conventional phone numbers — effectively a step backwards in Skype’s user interface.

Now that Skype has become more of a conventional VoIP company, it will look at VoIP peering, he says. “All VoIP islands should be peering, but exactly how, we’re not sure yet.” Skype has talked to VoIP peering company XConnect, he confirmed.

It’s a late transformation for Skype, which “from the beginning has focussed on the consumer”, says Öberg. Despite this strategy, many customers have used Skype for business calls: “About 35% say they are using Skype for business. We’ve known that for a long time. They’re very often individuals who have used Skype privately,” he says.

Skype, founded in 2003 by Niklas Zennström and Janus Friis, now carries about 8% of the world’s international calling minutes. Users made 3.1 billion minutes of calls to landlines and mobiles in the third quarter of 2009, using the SkypeOut links from the Skype system to the rest of the phone network.

Most of Skype’s usage is for free Skype-to-Skype calls — of which about 27.7 billion minutes were made in the same period. About a third of these were video calls, says Skype.

Meanwhile the company has been going through a rapid transformation of its own. Zennström and Friis, having sold the company to eBay in 2005 for $3.1 billion, are now back as minority shareholders, along with a group private equity investors and Joltid, their own company that owns the patents. Auction company eBay now has just 30%.

Confidential files

As well as voice and video, Skype consumers also use the system to send instant messages and — more concerning for network managers — to transfer files. “File transfer is a concern,” Öberg admits. Companies are worried that employees might use Skype to transfer confidential information outside the network — in an action that, because Skype transmissions are encrypted, would be undetectable.

So in its efforts to make Skype acceptable to enterprise, the company now allows business users to turn off file transfer and such features.

Business users have been wary of Skype for other reasons: primarily because the technology can eat up large amounts of bandwidth. Classic Skype is a peer-to-peer system: Skype has no infrastructure of its own, but uses customers’ own computers to route calls.

Skype for SIP is “pure voice”, says Öberg. The company has stripped off many of the extra features that have delighted consumer users but worried IT administrators.

The market opportunity is back to cost: making international calls for less money that via regular operators — so that puts Skype into direct competition with conventional and other IP service providers.

There is another angle to Skype’s business play: it wants business users to put a “Skype me” link on their websites to allow consumers to call them free. But this option would be open only to Skype customers: people would have to download Skype, if they didn’t already have it, to make such calls.

“Everyone can call via Skype,” says Öberg. Skype will deliver calls directly into the enterprise’s PBX. A caller that doesn’t have Skype on their computer “will be taken off to install Skype”, he adds. So it’s a sales tool for Skype to build up its userbase.

“It adds to the proposition for the SIP product,” he says, but why should enterprises rely on Skype for outgoing and incoming international calls? “There are a lot of upcoming companies that don’t have the trust or brand name that businesses expect,” he says. Skype does, is the implication. “Cheap is not convincing enough if you don’t have the trust of business.”

Changing perception

But does Skype have the trust of business? Or, at least, of businesses’ IT departments? Öberg admits there is some work to do. “The next challenge is to change the perception,” he says. He expects Skype to employ “people locally on the ground to talk about the solution and help if things go wrong”. That implies a significant investment in resources by Skype, but Öberg did not give details.

But Skype’s reputation among IT departments stems from its peer-to-peer product for consumers. “The SIP product is a whole different product technically,” he says.

The outbound service will sit on the edge of the PBX, so will not intrude into a company’s network. “Callers will dial the number,” he says. The PBX will then route international calls via Skype.

Callers won’t even be able to make calls to existing Skype users’ Skype names — simply because they’ll set calls up from a conventional telephone keypad. Even when companies use Microsoft Outlook contact directories to set up phone calls, it will be the number, not the Skype name, that will be used.

So this seems to be Skype going back in technology by several years, to become another VoIP provider competing on price with many other VoIP providers.

The company’s user interface is good — based closely on the instant-signup features that Skype has used for years for consumer customers. Potential business users can sign up online for Skype for SIP, download the software, find how to connect their PBX, and buy credit for international calls.

The company charges its standard rates for calls. For example, €0.02 a minute to Australia, China, the US and many other destinations, though some less popular routes are more expensive per minute: €0.06 for South Africa, €0.08 for India, €0.11 for Romania, €0.12 for Malawi, €0.14 for Paraguay and €0.33 for Afghanistan, for example. There’s a flat-rate connection fee on top: €0.04 for those destinations that cost €0.02 a minute; €0.09 for the rest.

Those rates are cheaper than standard international rates that incumbents and competitive operators charge, but are not stunningly cheap in comparison with other VoIP players. Skype is one of many VoIP players today.

Meanwhile some VoIP companies are recognising that they could offer cheaper rates if they peered their services, so that they exchanged calls — rather like internet companies peer data — rather than deliver all off-net calls to the local incumbent for onward routing.

XConnect is one of those companies that has pioneered this approach, with a number of deals with VoIP players — many cable operators adding IP telephony — in the Netherlands, South Korea and elsewhere.

VoIP islands

Öberg agrees that “all VoIP islands should be peering”, but “exactly how we’re not sure yet,” he adds. “How do we best capitalise on this?”

Meanwhile Skype will be planning how to promote its new business offering. There won’t be large billboards at airports, he says, but he doesn’t say what will be done. “We don’t want to try and do what everyone has done since the market was born,” says Öberg. “But we realise there is some investment to be made. It’s our challenge to communicate.”

The need for Skype for SIP was something that was seen “from the beginning”, Öberg says. Though Skype still wants to be more than a voice-only company, carrying “video, IM and wideband audio as well as presence information”, he says “SIP is for the companies that are not there yet. It’s a complement to the main Skype strategy.”

Ultimately he still hopes that people will call directly from computer to computer — the original Skype dream. “That is where the market is going.”

But others have noticed that too. Microsoft’s Office Communications Suite is already being developed so that Outlook users can set up and make calls directly from their PCs. Users are trying this out, and some operators are providing all-IP links for such services, bypassing regular phone networks.

So Skype will have to demonstrate to business users that its SIP offering is significantly better in terms of performance or cost that its competitors. GTB