Skype: Why everyone’s talking

International calls over the internet that cost as much as a local call. 171 million users are now enjoying the cost savings of Skype. Get on board. By BRAD HOWARTH.

By Brad Howarth

Everybody’s talking about Skype. How can it help you save money?

A broadband internet connection and the telephone are two must-have items for business today, forming the essential links between offices and the outside world. But now it is possible to use one to significantly reduce the cost of the other.

Skype is a free software tool developed by the European company of the same name, which enables users to make free phone calls using just their personal computer and an attached speaker and microphone.

The software digitises the speaker’s voice and transmits it as a digital signal via the user’s broadband connection, utilising the free backbone of the internet to carry the call potentially from one side of the world to the other. It’s called voice over internet protocol, or VoIP.

Once the user has downloaded the Skype software, they can begin to add in the names of other Skype users (often by using the software to find them), and begin making free calls. The status of each user, such as whether they are available, away or busy, is also displayed next to their name in the application. Users can also use the Skype software to exchange documents and send simple text messages through the software.

Skype can also make calls to the regular telephony network in several countries through a feature called Skype-Out. Users buy Skype credit that can then be spent on overseas calls. Because the calls are carried across the internet, the caller only pays the local call cost for terminating that call in the foreign country, skipping the long distance charges.

Another service, Skype-In, allows businesses to buy phone numbers in foreign countries, and have those calls routed across the internet to their regular phone. Hence a small business can have a local phone number for customers in a foreign country, where those customers only pay for a local call.

Skype’s Asia Pacific vice president, Scott Bagby, says initial interest in Skype came from consumers, but says that today about 30% of registered active users are business customers.

Not surprisingly, Skype has proven extremely popular for companies with multiple offices, and particularly with export businesses that are regularly dealing with colleagues and customers overseas. At the end of 2006, Skype had 171 million users, well up from the 44 million users when the company was acquired by the internet retailer eBay in September 2005.

Initially many users came from the technology industry; they are generally early adopters of new technologies. More recently the customer mix has spread.

“The reason they get into it is cost savings,” says Bagby. “Most don’t even know the full functionality of Skype until they have sat down and played with it for a while.”

Bagby says he knows of one company in Hong Kong that reduced its total telephony bill by 70% as a result of switching to Skype. Another client in the UK is planning to get rid off all but a handful of its office phones and replace them with Skype.

Recently Skype released new features to help small and medium-sized businesses better manage the way they use Skype, allowing a central manager to administer the software for multiple users. These include centralised administration of Skype accounts, and the ability to turn off features that are not wanted by the business.

“While cost drives people to Skype, the overall satisfaction tends to do with all our other products, rather than just saving money,” Bagby says.

Various companies have also developed software to make Skype more functional for businesses.

Melbourne-based Skylook, for example, has created software that links Skype to Microsoft’s Outlook e-mail and contact management application. The Skylook software enables users to make Skype calls directly from Outlook, but includes other features that allow callers to automatically record their conversations or send SMS messages to mobile phones. The Skylook software is available for sale from within the Skype Extras menu in the application software itself.

The developer of Skylook, Jeremy Hague, says he is witnessing steady customer growth. “Obviously there is a cost benefit with Skype, but now there are all these other things, like file transfer,” he says. “I think a lot of business still don’t know about Skype, but that’s changing.”

Interestingly, Skype does almost no traditional marketing or advertising, but relies on the network effect of one Skype user wanting to convert friends and colleagues to cut their call costs.

Another feature within Skype that is proving increasingly popular is video-calling. Any user that is equipped with a web-cam and a broadband connection can use the software to video-call any similarly equipped Skype user, effectively providing a free video-conferencing system for broadband users. As many as 20% of all Skype calls made now feature video.

Although Bagby says it is possible to make calls on Skype over a dial-up connection, the best results are achieved with broadband. He says Skype is constantly working to improve the call quality, and regularly surveys users for their opinions. Broadband is essential however for video-calling.

One Australian business to have embraced Skype whole-heartedly is ACI Global, a provider of competency-based training services. This service goes beyond regular written or oral examinations to observe a trainee’s behaviour and hence determine their competency at a task.

ACI Global’s managing director, Ian Erksine, says that by using Skype as a video-conferencing tool, his company can test any person anywhere in the world, provided they have access to a laptop computer and webcam, and the necessary bandwidth speed.

“It’s a very important part of our business, and it is something that is going to enable us to go out to the world and promote a training service that is very cost-effective, practical and what industry wants,” Erksine says. “This will put us way ahead of other players because of being able to embrace cost-effective and practical technology to do what others have been attempting to do, but at a fraction of the cost and more realistically.”

Skype will work with any standard web cam, and a range of telephone hardware is also available that works with Skype, including telephone handsets that allow users to make calls either through Skype or their regular landline. Skype-compatible telephone handsets are now available from companies including Netgear, Motorola and Plantronics.

Skype is by no means the only option for business users seeking cheaper, internet-based telephony solutions. Competitors include Engin, which for $9.95 a month lets customers make un-timed long distance calls within Australia for just 10¢. Primus Telecom also plans to release a packaged VoIP service in the second half of this year that will be suitable for smaller businesses.

In March Optus announced that it would launch a new VoIP product for small and medium-sized businesses in the second half of this year, to be called Optus inPhone Premier, although no details have yet been released.

Interestingly, in March the mobile carrier Hutchison announced that it would provide up to 4000 minutes of free Skype calls over its third-generation mobile data network, 3, for subscribers to its new X-series data subscription service.

Consumers who sign up for the new service receive a handset with the Skype software preloaded, and can then add their contact list and use the device for Skype calling as they would their PC.