Office 365 and Skype

I’ve been a bit slow to post about this I know, I’ve been offline for for the past few days so have only just started reading reactions to Microsoft’s $8.5 billion purchase of Skype.  The odd thing is that most commentary on the deal seems to be concentrating on video conferencing as the main driver for the deal.  Sure, the integration of Skype with Messenger, Xbox and WP7 etc. is good news, it might even be the making of Skype as the de facto standard for web and home video conferencing. For MS it could be one of those ‘good enough’ solutions that business adopt ahead of the better, but expensive Cisco/Tandberg solutions.  But, would MS spend $8.5 Billion for that?

Skype has never been particularly profitable, though it does have a significant and loyal user base, something that its rivals in the video conferencing world don’t necessarily have.  Of course MS itself has a huge number of Messenger users, and can probably use its shareholding in Facebook to encourage further integration with Skype.  So in the long term there may well be some significant revenues there, especially if MS can drive wider adoption of Skype’s chargeable services. There is however another area of Microsoft that is crying out for some of the services Skype has to offer.

Microsoft has invested huge amounts of time and effort in its unified communications tools, in little more than 5 years it has taken the OCS/Lync platform from being a half decent corporate instant messaging tool to a genuine competitor in the corporate telephony market.   Whatever you might think of MS, make no mistake Lync is a very good product, if I were Avaya or Cisco I’d be scared of it.   With the Office 365 platform Microsoft is taking Lync’s core functionality to the cloud and offering organisations Exchange 2010 mailboxes (including voicemail), Lync instant messaging, presence, audio and video conferencing, SharePoint and even a copy of Office 2010 all as a per user per month subscription.  The one large gap between 365 and the boxed product is the ability to make voice calls.

If you talk to MS about Office 365 they’re very keen to point out that voice calling capabilities will be coming later this year, they just never have any details.  Talk to some of Microsoft’s big telephony partners and the implication is that they will be providing the voice gateways into MS’s cloud services.  Partly this is because MS doesn’t really want to be a telco, with all the additional regulation that entails.  It all seems perfectly reasonable, and will probably still happen, but the Skype acquisition gives MS another option –  tie the Office 365 platform into Skype’s existing telephony services.

This would give Office 365 the ability to make voice calls over the internet directly from the Office Communicator client, Outlook, SharePoint or any other app that surfaces presence. With Skype’s VoIP network MS can offer those calls at its preferable rates, and potentially offer included minutes in the same way as a mobile operator would.  You can even envisage MS providing free end-to-end VoIP calls between 365’s end users computers and a shiny new Windows Phone 7 Skype client.

I reckon a combination of Skype and Office 365 could well be a winning combination for Microsoft, it’s the missing link in the Office 365 sales pitch.  The universal video conferencing stuff is nice and all, but it won’t pay the bills.  On the other hand Enterprise customers pay good money for their communications services, and with Office 365’s subscription model they pay per user per month.