Microsoft and Skype

Things that make you go Hmmmm. With today’s announcement that Microsoft is acquiring Skype comes a great deal of speculation. What is Microsoft up to, why does it need to acquire Skype and how will this acquisition reshape the world’s largest software company? Microsoft must certainly believe that it needs to aquire Skype given the price tag; $8.5 billion US is the largest acquisition to date by the company. What value does Skype bring? Does the value lie in its ability to innovate, in its creative and engineering teams, its leadership? Only time will tell what the actual value purchased will be, but let me put forth a framework. Skype’s technology connects people in a cost effective manner, has a reported 170 million users, and is growing significantly year over year. Microsoft certainly has an enormous user base (especially including operating systems and MS Office), its products create productive connections in most businesses linking people, data and desktop tools, but it is certainly not growing meteorically on its enormous base. So what does Skype bring? To say that it will be a growth engine for Microsoft will be a gross oversimplification. I think the dilemma that Microsoft is trying to solve is that a tremendous number of users today use Microsoft products because they have to. MS Windows is just there, MS Office is by default what is used in most workplaces, MS Outlook is a pervasive email client. Skype is used because people want to use it and it is an extremely people centric technology – it meets a very common, daily human need and meets it well. For the most part, people are seeking to use Skype, and just use Microsoft products because they are pervasive. By integrating the people connection strengths of Skype with the data and desktop connection strengths of Microsoft, Microsoft can create a person centric ecosystem which includes things like MS Office, rather than an MS Office centric model which includes people capabilities. Shifting the paradigm may drive growth, may spur broader adoption from corporations through to consumers and integrate Microsoft’s products with people’s personal lives rather than just their professional lives. If MS Office with fully integrated Skype capabilities becomes MS Community down the line, perhaps the $8.5 billion will pay off.

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