The danger in Skype's plans

04 Apr 2005 16:53

The free VoIP service provider's partnerships with independent developers could backfire, according to some. We look at the potential of the firm's plans, and their associated risks

Like the iPod, free phone service Skype is creating a coattail economy as hungry developers rush to cash in on its popularity.

In just 18 months, Luxembourg-based Skype has signed up some 31 million registered users, promising free phone calls over a broadband connection between two members anywhere in the world. Now Skype is hoping to take the service even further by recruiting third-party developers to build add-on programs that might attract even more customers and possibly take its technology in new and unexpected directions.

Since the company began licensing or giving away its proprietary source code late last year, an estimated 1,000 programmers have jumped on the bandwagon, creating dozens of free and commercial products for the service. Developers get the source code by promising to either give their products away for free or provide Skype a share of the profits.

"Skype prioritised freely offering the [source code] to expand the potential of Skype and inspire great developers worldwide," Skype spokeswoman Kelly Larabee said. "We will extend and formalise our software developer programs with time."

Building a viable developer community is considered a key step in the evolution of software dynasties. A few years ago, Microsoft CEO Steve Ballmer drilled the concept into the heads of Microsoft employees, bounding up and down onstage at a company event bellowing, "Developers! Developers! Developers! Developers! Developers!" The now-famous scene became the butt of jokes when the tirade made the rounds in an online video, but the truth behind the message has never been disputed.

Skype's developer program has seen some limited success so far. In the vanguard are relative unknown companies such as VOIPail, Connectotel and Meinskype, offering free Skype voice mail, SMS and ring tones, respectively.

Also in the works are Skype-based advice lines selling legal and medical information, astrology forecasts and other services. Paypal-style payment services for Skype have already been developed to handle micropayments involved in such transactions, potentially turning Skype into a sort of eBay for advice and dating services, if Skype developer Jyve has its way. The company is developing tools to let Web site operators cash in on just such a trend.

"Where I see money being made is for professionals to charge for their time over a Skype line," said Jyve CEO Charles Carleton.

Third-party applications are an important competitive bulwark for Skype, which is pushing to make its proprietary software an industry platform. Most of its competitors have turned to open standards-based technology known as Session Initiation Protocol, or SIP, that's used in instant messaging and Internet telephony and can be freely licensed by anyone.

Some backers of SIP have criticised Skype for potentially splitting the Net phone industry, undermining standards and interoperability — a threat that would become all the more acute should Skype's developer community take off.

Cannibalism — a gray market?
Although crucial for Skype's long-term prospects, courting developers is not without its risks.

Skype is beginning to roll out its own premium services, and it might face competition from similar products seeded by its developer program. For example, Skype is testing a voice mail system that it wants to sell in the future. Yet there are already at least a half-dozen free Skype voice mail add-ons available for download on the Net.

Skype has two other paid services up and running or in tests that might similarly come under attack. SkypeOut, launched last July, lets subscribers make calls from the Internet to the traditional phone network at a rate of about 1 penny per minute. It has signed up 1.1 million customers so far. Skype is also testing a service dubbed SkypeIn that lets subscribers obtain ordinary telephone numbers and take incoming calls, for a flat fee covering three months or a year.

Skype's Larabee downplayed the risk of those services losing sales to products contrived by developers.

"Skype voice mail is a premium product, and we are aware that other developers are offering alternative recording options," she said. "Skype is not concerned that a non-commercial developer could offer a competitor [to its premium services]".

Skype also faces serious challenges recruiting and retaining developers.

Since developers must pay Skype to sell products based on its source code, it could face a long-term disadvantage against SIP if its market share begins to slip.

Furthermore, because Skype is a relatively small company with not much more than 100 employees, developer support is a costly luxury. Some developers have complained they were basically left on their own to navigate complicated licensing contracts and technical issues, leaving it unclear whether developers are allowed to profit and under what conditions.

"It's long and complex," wrote Skype blogger Stuart Henshall of the company's source code agreement.

Some Skype developers have taken matters into their own hands, building their own support networks and laying plans to lobby Skype for a greater role in administering the developer community.

That's the idea behind SummitCircle, a popular Web site run by Louis-Philip LeNir. LeNir wants to serve as the developer community's collective voice and chief organiser; in effect serve in the same capacity as a town mayor.

"As things continue to grow, I expect to approach Skype and ask them if I can help organise the Skype ecosystem that's forming around them," LeNir said in an interview, promising that his first official duty would be to hold Skype's first developer conference. "Even loosely organised, we can provide a lot of value to Skype users."

Story URL: http://news.zdnet.co.uk/communications/0,1000000085,39193798,00.htm