Skype, which disrupted the telecommunications industry with free or low-cost calls routed over the Internet, is once again an independent company. EBay (EBAY) bought the Estonian startup in 2005, but, after a strained relationship, sold most of its stake for $2 billion in November. Now the new owners, led by private equity firm Silver Lake, are imposing business rigor on the company and pushing it to grab a piece of the corporate telecommunications market.
Skype is in talks to sell its software through Cisco Systems (CSCO) and ShoreTel (SHOR), both of which make phone systems, according to a person familiar with the discussions. Skype is also doubling the size of its sales and support team to better reach business customers and respond when technical issues arise.
Skype is already a verb for the more than 520 million consumers around the world who use it for phone calls or video chats. According to a report by investment bank Thomas Weisel Partners, Skype had $705 million in revenue last year, a 28 percent jump from 2008. The corporate market, which research firm IDC values at $203 billion, presents a more lucrative opportunity.
Persuading corporations to ditch their traditional carriers won't be easy. "There are some major roadblocks to growing this in the large enterprise space," says Jayanth Angl, an analyst at Info-Tech Research Group in London, Ont. Chief among them: giving IT managers more control. In industries such as health care and finance, companies need to track and monitor calls—something Skype doesn't allow for. Skype also needs to convince potential customers that its service, which is sometimes criticized for poor quality, is reliable and secure enough for important business calls.
To reorient the company, Chief Executive Officer Josh Silverman has replaced five people on his executive staff this year and cracked down on distracting side projects, which had some employees spending their time building 3D chess software. "Skype is serious about providing our business customers the tools and features that put them in control," says David Gurle, who left Thomson Reuters in January to run Skype's business division, where he's doubling head count, to about 100 people.
Skype isn't the only option for companies looking to cut costs by routing calls over the Internet. AT&T (T), BT Group (BT), and others already offer Net-based phone systems. Skype is developing an incentive program to encourage ShoreTel and Cisco to recommend its service, possibly by sharing revenues or offering commissions. That may help, but Skype will still need to compete for attention. "Skype is one of" Cisco's relationships, says Mark Monday, a vice-president there who oversees the small business group. "But it's not the only one."
The bottom line: Skype hopes to work with Cisco and ShoreTel to make inroads into the $203 billion corporate telecommunications market.