Microsoft's Skype acquisition could change the world

Posted by Rob Enderle

The Microsoft-Skype merger is potentially the beginning of the biggest change in technology since the PC. Of course, this is hardly the industry's first attempt to redefine the lucrative space.

Back in the 1980s - when I first formally came into the technology industry - there was a massive push to force telecommunications and technology together.

Microsoft's Skype acquisition could change the worldThis is kind of like mixing oil and water, really, so it didn’t go too well, which contributed to both the failure of old AT&T and the near failure of IBM.

Unsurprisingly, the failed attempt scared both industries half to death and kept them pretty much at arm’s length until now.

However, with the purchase of Skype, Microsoft steps solidly into the telecommunications space, a move which could forever change both markets. Although Redmond massively overpaid for the company, the benefit in terms of strategic market leadership, as well as the damage it does to Google’s initiatives, easily eclipses the initial price tag.

Remember, it isn’t the product alone that gives it this value, but rather, the Skype-MS combination which immediately assures Redmond's relevance in an emerging area.

The Telecom Problem

Telecom has been badly stalled. Back in the 1960s we started messing with video conferencing and have since moved to HP Telepresence. Yet,  (and this amazes me), the systems still don’t talk to each other even within the same vendor.  

For example, Cisco’s consumer UMI product (which has been failing) won't talk to Cisco’s Telepresence solution, while Logitech’s Google TV box won’t talk to their new home video conferencing product.  

Since the 1980s we have been showcasing technology that would allow email and telephone services to integrate and do things like log calls, automatically identify callers on the computer screen and display email, or telephone notes to the user as the phone was ringing. However, a lack of common interfaces, standards, and any real focus on total solution by companies like Microsoft kept such  features from broad market adoption.

It is quite ironic that most of the really cool stuff created for users and companies in telecom and video conferencing doesn’t work because it fails to interoperate. And clearly, telecommunications only works because phones function with other phones.  

Historically, it was as if an entire industry refused to understand the critical element of interoperability, and as a result, was replaced by email, social networks, instant messaging and texting.  

This doesn’t mean there isn’t a massive potential for an integrated text/voice/video product; but the lack of cooperation on the voice and video side really killed the industry.

Microsoft + Skype

Microsoft is one of a handful of companies capable of creating a standard that will be adopted by an entire industry, which remains the key item - missing for decades - in the telecommunications space. Meanwhile, Skype is the largest Voice Over IP (VOIP) provider and offers not only voice but video services. 

By combining the two we have the first real example of telecom and data merging into a broad technology solution since AT&T bought NCR or IBM bought ROLM.

But, this time, the acquired entity is more of a technology company than a telecom corporation, thanks to the VOIP technology they market and sell. 

In short, it should work this time around because in the 20 or so years since the other failures, analog  telecommunications pretty much died out and is in the process of being replaced by companies like Skype who reside on the data network. 

Under Microsoft's auspices, companies are far more likely to build Skype support into their HD TVs for home video conferencing. In addition, Skype may become the common default for company telepresence to ensure interoperability between various products and businesses.

Integration into Microsoft Outlook and Exchange certainly appears to be on the horizon, as does Facebook’s licensing of the technology for voice and video communications on the social networking site. The Xbox becomes a natural place to put Skype for TVs which are older and aren’t connected - and now I expect to see it on a growing number of set top boxes as well.  

In short, over the next 2 to 5 years Skype is likely to become the communications standard that we have been waiting for. 

Wrapping Up:

The technology and telecommunications markets have been on the cusp of a combination that could change the way we communicate, collaborate, socially network, and even travel (electronically) to new places.  

A lack of cooperation between industries and vendors has prevented the broad improvements we otherwise would have received. This little, and admittedly expensive, acquisition has a good chance of changing that and opening a floodgate of pent up changes which could impact every market because communication is core to all of them.   

Microsoft's acquisition of Skype is potentially the cornerstone of what could define this decade's technology market. I doubt that any of us, including myself, are able to yet understand the full implications of the deal.