Skype Case

Introduction

In 2003 founders of Kazaa, Niklas Zennstrom and Janus Friis, lunched peer-to-peer voice over Internet protocol -Skype. At the beginning Skype, acquired by eBay in 2005 for $2.6 billion, was a small company with 200 employees with the main office in Luxemburg and two offices in London and Tallinn, Estonia.

All the previous VoIP services were based on client-server architecture and Skype relied on peer-to-peer architecture that was a progress because that meant distribution of user directory among network peers with no expensive centralized server infrastructure.

The basic founder’s idea was to enable free phone services that are going to work over Internet. Skype as a new way of communication allowed free PC-to-PC calls, sending video and text messages and file sharing over Internet. There was also available SkypeOut service that allowed PC-to-Phone calls at lower cost (2 euro cents per minute), and SkypeIn service that made possible calling a PC from a regular phone with a yearly subscription of 30 euros. The founders new the fact that very big percent of the population who use traditional phone have huge phone bills caused by many expensive international calls. That was enough to get an idea of introducing a new free phone services. All the potential users should have had was the Internet and installed Skype software for Windows, Macintosh OS X, Linux, or Microsoft Pocket PC.

Even though Skype have had its website where users could download the software, they didn’t spend any money on marketing. They actually trusted in word of mouth marketing at least for the basic free services. And the idea brought a positive result so Skype at the moment when was acquired by eBay had 54 million users and 2.7 million premium service customers.

Now we can say that Skype has a community that consists of loyal users who now can search for others to chat in foreign languages and the businesses that can be contacted over Skype. There are many other services added lately. Actually, Skype has its own ecosystem that consists of third parties that integrated its applications into Skype. There are software add-ons that give Skype voicemail and integrate Skype with email programs such as Microsoft Outlook. Also, there are phones that can be plugged into a computer so users actually don’t need a headset and adapters in order to use a standard phone with Skype. The community aspect shows up with sites where you can find others to chat with in foreign languages or directories of businesses you can contact with Skype.

Skype SWOT Analysis

Skype is a software program that uses the voice over internet protocol (VoIP) in order allows users to make telephone calls over the internet. Skype relies on peer-to-peer technologies to make its network scalable as opposed to the SIP protocol.

Favorable and unfavorable economic, business, political and technological factors affect Skype, its business, and reveal its strengths, weaknesses, external and internal opportunities and threats.

Strengths:

a. Skype offers different levels of service which allows Skype to match the needs of many different users:

o Free вЂ" Skype users can place VoIP phone calls to other Skype users

o Paid вЂ" Skype offers two types of paid services, SkypeOut and SkypeIn

 SkypeOut - Allows user to place out-going phone calls to traditional phone lines including cellular phones.

 SkypeIn вЂ" Allows users to receive traditional phone calls on their computer

o Videoconferencing вЂ" Allows user to videoconference with other Skype users

b. Skype has more registered users (276 M as of 2007) than all the other VoIP providers combined

c. Skype is multiplatform (Windows 2000/XP/Vista, Mac OSX, Linux, Windows Mobile, Sony PSP) allowing it to suit the needs of more users

d. Skype has user-friendly GUI, which makes it easy to make an easy enough even for the first time user

e. Skype uses peer-to-peer architecture which saves Skype server infrastructure

f. Skype is the first telecommunication company with international presence and worldwide recognition, unlike many US Telecoms

g. Skype has loyal customer base, who uses free and premium services , and unlike many companies, has ecosystem, companies which produce Skype products

h. Synergy with eBay could increase companies customer base and profitability as both companies may compensate each others weaknesses

Weaknesses:

a. Skype’ peer-to-peer architecture relies on the quality of the public internet and connection speed of its customers, lower the speed, lower the quality of the communication

b. If the number of users starts to decrease, the efficiency of the network would decrease since it is based on a peer-to-peer model

c. Skype is configured as a supernode, an issue that has caused controversy.

d. Any of the other VoIP providers could create software to compete with Skype

e. However it has worldwide recognition, it is blocked in some countries due to VoIP technology

f. Skype lacks of clear strategy after its acquisition by eBay

g. The process of buying credit is weakness of the company, as it takes time for accounts to be credited after having paid for service.

h. The company does not offer technical services, does not have physical customer service, which may consist of customer assistance phone calls and etc.

Opportunities:

a. Skye has the ability to grow now that they have been acquired by eBay.

b. Skype and eBay’s user base barely overlapped at the time of acquisition, meaning eBay will be able to grow to the 54 million Skype users (at the time) and Skype will be able to market its self to the 72 million active eBay users.

c. Skype operates is own private network, that will all Quality of Service, and packet priority

d. Skype uses a peer-to-peer model for their software, using people who are connected to the network