Companies Embracing Skype—With Reservations

By David Spark  |  Posted 2005-12-12

Companies Embracing Skype—With Reservations

With more than 13 million users worldwide, Skype has quickly become the Internets favorite free peer-to-peer voice-over-IP application.

"Skype has become very successful because its [an] easy-to-use, great-sounding person-to-person communications medium with some other bells and whistles like audio conferencing," said Andy Abramson, editor of the blog VOIP Watch and co-host of KenRadio Broadcastings "World Technology Roundup".

Like most grass-roots Internet technologies, Skype (developed by Skype Technologies S.A., in Luxembourg), started as a hobbyist tool that soon began to take root in the business market. The company says that almost half of its customers are now using Skype for business communications.

"People start using it just because it makes their communications workflow easier and more efficient," said Janus Friis, co-founder of Skype.

Jeff Craig, vice president of sales for BridgePort Networks Inc. in Chicago, was one of the first Skype users. His company develops technology for mobile phones and other devices to roam from a cellular network to a WLAN (wireless LAN) and onto the Internet.

With a constant eye on VOIP technology, Craig said he tested Skype and instantly fell in love with its interface, simplicity and quick-to-talk capability. As a result, he said he persuaded everyone in his 80-person office to install it.

"We did it as a way to reduce our costs that we incurred for conference calls," Craig said. "We also found it very reliable for international calls. So when I travel to Europe, which is every other week, I can pay Vodafone [Group] $3 a minute, or I can fire up my Skype client in a hot spot. When Im on an hour- or 2-hour-long conference call, those are big savings."

The high cost of communication at a far-off physical location can often be an impediment to participation. And as Craigs constant business travel illustrates, "Weve moved into an environment of a distributed work force," Abramson said.

Its this new dynamic that has allowed innovative business models—Internet-based, not telephone company-based—to rise in prominence. "Their cost per customer acquisition is almost nil," Craig said. "Their biggest problem is what to do with all the subscribers that they have."

Skype hopes to answer that challenge by creating a small-business-group application that addresses the needs of workgroups. The business-centric Skype, released this year, includes integrated billing for all workgroup users, user management and group messaging.

Currently, PC-to-PC calls, aka Skype-to-Skype calls, are free. Skype calls that cross the PSTN (Public Switched Telephone Network) to reach a land-line or mobile phone must use the SkypeOut service. The company charges for SkypeOut: a few cents per minute in addition to the cost of terminating the call—a cost that can increase dramatically if the receiving party is international, on a mobile phone or both.

David Coursey wonders if businesses really need Skype or just want it, and if its worth the risk. Click here to read more.

That may seem like an odd coincidence to some. Skype is Internet-based and very different from a traditional phone company, according to Skypes Friis. But Skype is trying to make money just like a phone company, argues competitor Dmitry Goroshevsky, co-founder, chairman and CEO of Popular Telephony Inc. of Sophia Antipolis, France. Like a telco, Skype provides interconnect services whenever you make calls out to the PSTN.

Unlike Skype, Popular Telephony offers a serverless peer-to-peer technology known as Peerio. The company sells IP phones and software that allow for direct one-to-one calls without the need of a central managing PBX or network cloud. Goroshevsky argues that Skypes use of unknown supernodes to route traffic and act as a directory server make the product inherently less secure.

Skype officials said they are aware there are security concerns with their product, but they contend thats based on perception.

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"It probably has to do with the fact that Skype is using peer-to-peer technology. And peer-to-peer technology is something that is, in many cases, associated with file sharing and [Sharman Networks Ltd.s] Kazaa," Friis said.

In addition, Friis said he understands that IT managers at large companies question any Internet application installed on a users desktop. There are communication infrastructure issues and corporate security requirements in large organizations that probably dont exist in small businesses, he said.

"I think the usage for Skype in a [small or midsize] business or SOHO [small office/home office] environment is very cut-and-dry. Its when you get into those larger enterprise environments where it becomes more of a big deal," Craig said.

Skype officials admit the technology is not designed to be an enterprise-grade tool. Click here to read more.

Skype is not in a position to replace your telephone company. "Skype is a supplement. Its not that General Electric [Co.] has replaced their entire communication system with Skype. Thats not what we see now," said Friis. What Friis said he does see are small businesses adopting Skype as a tool for traveling employees to call home base, just like Craig does.

The inability to get the enterprise customer comes down to QOS (quality of service), said Abramson, who, as an editorial voice in the VOIP market, also represents Popular Telephony in public relations. While Skype is constantly upgrading its product, it cant offer guaranteed QOS like the telcos do, said Abramson. Skype has no SLAs (service-level agreements), but, then again, said Abramson, what can users really expect? Skype is essentially free.

Yet, even without the QOS and the SLAs, Skype has made a major impact. "Phone companies are cautiously watching, and they make moves like elephants. Skype is like a bumblebee. Theyre stinging the elephant on the butt," Abramson said.

Abramson uses Skype, but he said he relies on other tools for communications. "I like Skype. I like for what [it] is used for. I like the Internet intercom. But would I give up my phone and use only Skype? No way. I love my CallVantage [AT&Ts VOIP solution] line too much. CallVantage has all the things I need ... it sounds good ... it reaches me anywhere, and it can find me. Skype cant do that yet," Abramson said.

Craig, who has been using Skype also on his PDA, is a far more devout fan. "I got to a point where I was using it so much I wondered why I still had a cell phone," said Craig. "When people want to reach me, they would try me first on Skype."

David Spark is a freelance writer in San Francisco. He can be reached via e-mail at

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