Skype Strikes Again - aiming at disrupting the SME market

I was quite amazed to read about Skype's new coup. Until recently Skype was merely (but successfully) offering free or cheap Voice-over-IP (VoIP) calls over the Internet. Now Michael Arlington from Techcrunch reports that Skype has introduced a new real-time language translation services for Skype voice calls. The service supports 150 languages and it costs $2.99 per minute. Skype is able to offer this to the market through a partnership with Voxeo and Language Line Services.

From a business model design and innovation perspective this is very interesting because it addresses several business model elements at the same.

  • it's an extension of the existing basic value proposition of free/cheap VoIP calls;
  • it aims at the lucrative market segment of Small and Medium Sized Enterprises (SMEs);
  • it opens up a new revenue stream;
  • it represents a strategic differentiator from the other (mushrooming) VoIP services.

I already knew that Skype was trying to enter the enterprise sector from the interviews I did last year for a study about the company. At the time they were particularly aiming at the Small and Medium Sized Enterprise (SME) sector. With this new product announcement they are now coming up with a real extension to their value proposition (free/low cost VoIP telephony) to offer something of substance to differentiate themselves from their competitors.

In terms of business design it means that they are extending their basic value proposition that addresses anybody in the world in order to address a specific and lucrative market segment: SMEs that need translation services (though the service is available to anybody). So on the one hand it is a competitive differentiator and on the other hand it opens up a new revenue stream for Skype (and its partners).

If you think the SME market isn't attractive then think again. SMEs make up the bulk of most (if not all) economies, though they are less visible as individual companies than multinational giants such as Citi Group, IBM, GE etc. Skype can address the entire global SME market in a strike because they do not have to maintain any physical presence or assets in the different countries. They can offer the entire service and customer relationship 24/7 over the Internet...

For those that are still doubting of Skype's potential to further disrupt the global communications market: keep posted or hire me to explain you ;-)