Skype, Live Messenger, and the Looking Glass

UC vendors by necessity will update their products over time. Usually the journey is straightforward, as in adding new features and functionality or enhancing performance or security. Occasionally the changes are not straightforward and consumers, enterprises, partners, and competitors are left scratching their heads over what the vendor is trying to accomplish. Vendors argue that these puzzling changes they make reflect business or technical decisions that they expect to pay off in the long-run at some measured short-term disadvantage or loss of momentum. Where it gets really interesting is when a vendor makes this kind of shift and it inadvertently allows new competitors to splash on to the scene. Such is what seems to have recently happened to Microsoft in its consumer UC offerings.

As widely announced, on April 30, Microsoft completed the retirement of its Live Messenger consumer UC product and the migration of those customers to Skype. It probably didn’t really make sense for Microsoft to support two consumer UC products so the consolidation had appeal. However, the conversion took place in the approximate timeframe when Microsoft was also moving consumers from Hotmail to Outlook.com and was trying to get them to upgrade to Windows 8 and maybe even to shift to the Office 365 cloud. The results were confusing for many. For some there was stupefying chaos trying to manage multiple address books and trying to adapt to the workflows that are supported in Skype’s P2P architecture versus what consumers were used to from Live Messenger’s server-based solution.

In the meantime, vendors like WhatsApp and Viber were in market with mobile apps that arguably had a more robust user experience than what Skype was offering users of the retired Live Messenger. Country-specific messaging applications like KakaoTalk emerged in Korea and NHN Line, WeChat and Voxer were taking significant messaging share in Japan, China and Brazil, respectively. More robust applications like Kik, Maaii, Viber and Nimbuzz were rapidly innovating and signing up millions of customers. And social media platforms like Facebook Messenger and Google Hangouts launched and made serious inroads with consumers.

AOL’s AIM and Yahoo Messenger have been in free-fall as consumer messaging platforms and Skype had so much energy behind it that expectations were Microsoft would stay ahead of the pack and get something of a turbo-boost from the retirement of Live Messenger. However, recent Onavo data show that Skype has actually stalled, declining over six percent in June alone. While still a market leader, Skype looks suddenly vulnerable and Microsoft appears to have not substantially benefited from its retirement of Live Messenger. And a horde of capable competitors have gotten traction.

Skype may well rebound in dramatic fashion after the release of the Xbox One – it is far too early to be writing its epitaph. The lesson here is less about Microsoft and more about the reality that in the highly competitive UC space the need to innovate is relentless. Vendors will suffer when they lose momentum from product retirements, acquisitions, and reorganizations that allow competitors to swoop in with fresher ideas. Are Microsoft, Cisco, and Avaya suddenly vulnerable in the enterprise UC space? They all do seem to be investing a lot lately in organizational and product changes that could be best described as “catching one’s breath” rather than driving significant innovation. Perhaps challengers like Twilio and Nexmo with their API approach have been given their moment to break into the enterprise UC space.