For SMEs with up to ten employees, Skype’s cost advantages are likely to outweigh quality of service and security concerns
Skype, the Voice over IP (VoIP) software company recently acquired for USD2.6 billion by Internet commerce company eBay, is making a big push to win over small-businesses of up to ten workers. VoIP is a cost benefit to businesses in general, although the growth of internet telephony services in the small and medium enterprise (SME) market has been slow, since retaining public switched telephone network (PSTN) services is still viewed as necessary for reliability and professionalism.. However, we believe that Skype can be of value to some specific types of small businesses as a complementary voice service. A deep-seated desire among most small businesses to retain their geographic number and Skype’s disclaimer on access to emergency services will mean that Skype will not replace the PSTN, even for small businesses. The most likely success will come where the competitive advantages of a peer-to-peer (P2P) voice solution and cheap international call rates can be leveraged and security concerns are not of paramount importance.
A deep-seated desire among most small businesses to retain their geographic number and Skype’s disclaimer on access to emergency services will mean that Skype will not replace the PSTN, even for small businesses
Skype introduced several services on March 7 designed to make it easier for small business users to manage their communications over the Web. Those services include a new Web site dedicated to small companies (www.skype.biz), video conferencing, user groupings, directories and as well as improvements to a program that lets companies manage their employees’ prepaid Skype accounts.
Skype will attract businesses who regularly make long international calls, and who can leverage the P2P advantage
Skype is not the only VoIP provider targeting the small-business market, but its competitors are generally looking to replace PSTN services. Vonage has two small-business plans whilst providers like Bulldog offer PSTN, broadband and extra VoIP channels.
While all VoIP communication is cheap (and offers considerable cost savings over the PSTN) Skype can offer cheaper international calling than the rest. SkypeOut’s per-minute international rates are up to 50 per cent cheaper than most other VoIP providers (e.g. Vonage), so the more international calls made over SkypeOut, and the longer each call is, the greater the savings.
If this advantage is combined with a situation where a significant proportion of an SME’s business contacts are also using the service, the network effect can be used for additional competitive advantage. Typical businesses able to take advantage would be professional service consultancies, marketing agencies and creative design houses with multinational client bases.
For SMEs with up to ten employees, Skype’s cost advantages are likely to outweigh quality of service and security concerns
Anecdotal evidence suggests that the quality of service offered by Skype is matching business customers’ expectations, but concerns still remain in areas of availability, quality and security.
Incumbents still tend to emphasise the notion of PSTN service level availability, which may resonate with small businesses in extended supply chains, who often operate on tight operating and cashflow budgets and simply cannot afford unplanned downtime. The issue of voice quality is not a Skype problem but an Internet telephony problem and therefore a reflection on the quality of the service that is provided by the ISP. The security concerns are not unfounded (although Skype calls are encrypted unlike those of most other VoIP providers) but for SMEs in most sectors with less than ten employees, security is unlikely to be a deciding factor compared to the potential cost savings.
