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Skype buys Cisco (executive) – now what?

Skype (www.skype.com) has hired Tony Bates, formerly Cisco’s Senior VP and GM of Enterprise, Commercial and Small Business.  So now what?

I suppose this kinda-sorta explains the origin of the rumor that Cisco was going to buy Skype.

Speculation ranges that Bates’ experience with Enterprise will help Skype get traction into the business market, but there are bigger fish to fry.  The company has the IPO in progress, so Bates will lend credibility to that effort.

However, he will have to work to streamline and unify a company that is, according to one source, “full of lawyers” and seems to have different and conflicting agendas in Estonia, London, and Silicon Valley.

He will also have to diversity the company’s main source and means of revenue ASAP, perhaps by moving to a pre-pay/monthly fee schedule for users.

Hearsay?  Blow away all the shiny hype and Skype’s primary revenue model is pre-paid calling card without the plastic and middleman. Throw in a little old-style Telco thinking on top through SkypeConnect since business users pay for minutes between their baseline IP PBX and Skype’s network, but that’s IT my friends.

With no monthly recurring revenue, Skype is dependent upon the whims of its customer base, currently at 9 million or so paying customers. At some point of inflection, more Skype customers move to Skype-to-Skype (currently no-charge) calling (audio or video) than pay for SkypeOut enough to pay the bills and where are you?

Yes, it is nice that Avaya will be selling SkypeConnect, but this is the second or third time that Skype has launched into the business community – we’re coming up on the second anniversary of the Skype/Digium agreement/announcement and you don’t see a whole bunch of channel partners benefiting from that effort.

Corporate America might have enough to deal with in its migration from legacy to IP-based PBXes, so throwing a non-standard, pre-paid-minutes Skype network on top of vanilla SIP trunking and post-paid, reliable phone service.  Complexity is bad, simplicity is good.

Speaking of Cisco, there’s been a lot of jawing about the company’s new umi consumer “telepresence” solution.  It’s priced high ($600 list for the hardware) and Cisco – being no dummies – want $25 per month with a year commitment for unlimited video calling.  We’ll see, but it is a clear contrast pitting Cisco against Skype in the consumer video world.

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