Skype's New CEO Has His Work Cut Out for Him

It's patently obvious why Tony Bates, the incoming CEO of Skype, was tapped for the gig: The upstart communications company needs a serious player at the helm to help it crack the corporate market and effectively attack the cash-cow voice and video communications businesses.

Whether Bates can do that with Skype's still-spotty voice service and jumbled video conferencing offering is another question entirely. Add in Skype's reputation for not being terribly forthcoming with APIs to allow its software to work with other companies' systems -- and APIs are the lifeblood of any so-called platform company -- and Bates will have his work cut out for him.

Bates comes highly recommended from Cisco Systems (CSCO), the big daddy of the network and communications industry, and a savvy player that has shown a deft touch in acquisitions in both the enterprise and consumer business segments. Those acquisitions have, time and again, landed Cisco in the right place to take advantage of market trends. Its purchased Linksys just when home networking started to rise, and picked up video camera maker Flip on the cusp of a huge upswing in user-generated online video content. Bates ran the tech giant's enterprise, commercial and small business division, among other areas.

Convincing Corporate IT to Give Skype a Chance

Cisco has earned its highly respected straight-shooter persona, but Skype's image is almost the opposite. It has been something of a corporate wild child, tarred with lawsuits, allegations of ill-gotten software code, and high-profile executive departures. But after online auction company eBay (EBAY) sold a 65% stake in Skype to private equity giant Silver Lake in late 2009, and its two powerful but unpredictable founders, Niklas Zennstrom and Janus Fris, settled litigation against the company they created, Skype appeared to have finally primed itself for a real run at the corporate market, where the real gold lies. Skype already dominates the freemium model for international voice and video calls, and it's the tool of choice for startups looking to skimp on communications costs. Getting into corporate coffers could prove quite a bit harder.

Sponsored Links

Corporate IT departments have long decried Skype's closed architecture as a potential security risk. And unlike traditional phone lines, Skype clients are vulnerable to nasty spam attacks. What's more, Skype's quality can be highly variable when dealing with other phone systems (even though Skype-to-Skype call quality generally beats legacy land lines for voice quality). That said, a handful of intrepid developers have built Skype-based PBX applications, and as corporate America weans itself off pricey twisted copper and warms up to VOIP applications, Skype is positioned atop a rising tide that could lift all boats.

A recently announced deal with Facebook, with exact terms undisclosed, could provide another market-share injection to Skype, which is still relatively unknown among the over-45 set. For Bates, getting Skype to really fly will be a delicate exercise: He'll need to build a vibrant developer community, improve service quality, and sweet-talk corporate buyers without losing the core audience that fell in love with the free phone service from the start. With Skype's explosive growth rates and fast-rising revenue, Bates has ample cushion for experimentation, but taming the wild child that is Skype could prove a bit more difficult than reining in its founders and putting a new coat of corporate-hued paint on headquarters.