The VoIP industry
I n any competitive industry becoming market leader is something that takes a lot of effort, innovation, correct decision-making and also a slice of luck. Achieving such a position can more often than not be attributed to more than just one factor. Skype did not reach the peak of the Voice-Over-Internet-Protocol (VoIP) industry because of one single reason. They placed great focus on pursuing a superior business strategy to their competitors while at the same time ensuring that they were always at the cutting edge of VoIP technology.
Coupled with this, the industry conditions (which were partly outside of its control) allowed for its rise and success to happen. After having assessed the above reasons for its prosperity in the essay with the aid of several core E-business models, it is imperative to then analyse just how safe Skype is in its position of market leader. In many walks of life, getting to the top can be hard, however maintaining that position is even harder.
Member Development Akey part of Skype’s strategy is to generate revenue solely through its “premium offerings” such as making and receiving calls to and from landlines and mobile phones, voice mail and call forwarding. Skype attracts customers
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It relies on customers to become “hooked” into the programme and then start making premium rated calls to make their money. Through pursuing such a strategy consumers do not feel pressured into giving out their credit card details which in this day and age is something many are reluctant to do. Within e-Business it is acknowledged that there are four critical stages to member development. Skype has fulfilled each stage exceedingly well.
This is demonstrated in the diagram below: User-Friendliness Furthermore, the downloading, installation and use of Skype software is such that even non computer literature individuals can carry them out with ease. This is a key aspect of their strategy that immediately separated them from the rest of the pack when entering the VoIP market. It is important to remember that Skype is now a product that is marketed to and used by both personal and corporate users. While those at home may have time to get used to/experiment with a program, companies are not so fortunate in this aspect.
In between the hectic day to day processes, firms expect to be able to implement and use a program that is easy enough for all employees/associates to use; otherwise wasted time would result in depleted profits. Fortunately, since Skype is unique in its ‘user-friendliness’ both personal and corporate clients have taken a great liking to the program. This is reflected in the statistic that Skype now has something to the effect of 100 million users worldwide. Technological Advantage Another aspect, equally important as the successful strategic decisions discussed above, is Skype’s ability to stay at the forefront of VoIP technology.
It would be no use Skype being easy to use, commitment free and innovative in design if the most important element of the program (first-rate audio-visual quality) was sub-standard. It is evident through Skype’s company ethos that always using the latest technology is absolutely imperative to them. It is also part of the reason why they are so successful.
The essential ingredient used by Skype that results in the excellent voice quality of Skype-to-Skype calls and facilitates quality in Skype-to-SkypeIn/Out calls is the Voice Engine for PC and Voice Engine for Windows Mobile licensed by Skype from Global IP Sound (GIPS). Combining codecs, echo cancellation technology and other voice and packet management features the various GIPS Voice Engines eliminate or minimize the impact of inherent network problems and deficiencies introduced by factors such as delay, jitter, packet loss, clock-drift, acoustic and network echo (Courtney, J., 2006).
Skype’s technology is unique and arguably far superior compared to other VoIP providers as it operates on a peer-to-peer model, rather than the more traditional server-client model. A peer-to-peer (P2P) computer network is a network that relies primarily on the computing power and bandwidth of the participants in the network rather than concentrating it in a relatively low number of server-farms. P2P networks are typically used for connecting nodes via largely ad hoc connections.
Such networks are useful for sharing audio, video, data or anything in digital format is very common and real-time data, such as telephony traffic – which is embedded in Skype’s technology (Max, H. , 2006). The Skype user directory is entirely decentralised and distributed among the nodes in the network, which means the network can scale very easily to large sizes without a complex and costly centralised infrastructure It is however worthy of note that both ease of use and technological levels of a product are two key aspects within the ‘Technology Acceptance Model’.
The Technology Acceptance Model (TAM) attempts to predict whether people will accept an information system based on two variables: 1. Perceived Usefulness (PU) 2. Perceived Ease of Use (PEU) Davis showed that users weight the PU of an information system higher than its PEU and prefer using a useful one over a simple one. Internet phone calls existed before the existence of Skype yet were widely unavailable to the average internet users, and thus the creation of Skype filled a gap in the consumers’ needs.
The fact that Skype is relatively easy to use, in addition to enabling the user to get acquainted with it before paying a single cent, and fulfils those needs is what led to Skype’s success. However, Skype’s technology can be very misleading as it is in fact very complex and places a high strain on the user’s computer which can have an external, negative, impact on the perceived ease of use as the user needs to battle those burdens. In spite of this however Skype still remains in line with the TAM due to its uniquely high level of usefulness (Boddy, D. , 2005).
Therefore when assessing the TAM above it is clear that there are certain drawbacks to using Skype. However, when looking at the costs and gains from using it, the gains far outweigh the negative aspects and hence the Technology both according to this model also to the real world is fit to enter the market and be accepted. Once again, this is manifested by Skype’s incredibly large network of users reaching over 100 million globally. Customer Awareness A side from striving for excellence in terms of ease of use and technology, Skype constantly aim to improve their software.
Their approach centres around creating “value for their customer” where by their products are up to date and always beating customer expectations. A prime example of this is that they have recently launched their Skype 3. 0 programme with new features such as “Skype casts” (allows users to have video/voice conferences with up to 100 people). It also allows users to customise their own version of Skype and make sure that their version matches their personality and needs. This is an important feature in today’s market as customers are becoming increasingly aware of what is available on the market and have larger expectations.
Through staying dynamic, innovative and resourceful Skype are constantly creating more value for their customers in terms of “differentiation”. Using the Servqual (or more specifically the Esqual Model) it is possible to analyse in what exact ways Skype deals with their customers and caters to their needs. Many businesses are successful in the short term yet due to disregarding their customer needs they fail in the long run. SERVQUAL or RATER is a service quality framework, an instrument designed by the marketing research team of Berry, Parasuraman, and Zeithaml.
Through numerous qualitative studies, they evolved a set of five dimensions which have been consistently ranked by customers to be most important for service quality, regardless of service industry. These dimensions are Tangibles, Reliability, Responsiveness, Assurance and Empathy. Skype’s service quality can be measured by the web version of the above model – ESQUAL, which measures the Efficiency, Fulfilment, System availability and Privacy of the organisation’s website. The ESQUAL instrument helps service providers understand both customer expectations and perceptions of specific services, as well as quality improvements over time.
It may also help target specific service elements requiring improvement, and training opportunities for staff (Parasuraman, A. , 2005).. Efficiency Skype server is running on a large scale of servers enhancing its efficiency and productivity in permitting end-users to access the website effortlessly and at moderate speed. Fulfilment In terms of fulfilment, the site lives up to its promise and consumers’ expectations in downloading the Skype software and other add-ons without any technical problems.
It also illustrates the various site maps laid out as gateways to sub-websites pertaining to other premium services and corporate information. System availability The Skype website conforms to system availability reliably while concurrently depicting the required information & data in the website by the user. Privacy of organisation’s website Skype’s website is well protected against spammers and has incorporated a Skype security resource centre to verify the security protocols integrated within the website. Skype’s Value Chain – Broader Prospective W
hile the parts of analysis and their respective models have so far dealt with specific areas of Skype’s success it is equally important to look at their situation on a slightly broader scale. One has to remember that while Skype have their core competencies which have been described in detail already, it is crucial that they configure their value chain to accommodate for these competencies. A company may have many assets yet if their value chain is not structured in the correct way they will not be able to earn higher profits than their competitors.
The value chain of any company describes each function of the organisation and how the managers of that firm can create value in each on of these functions in order to create a competitive advantage over their rivals. The e-business value chain is concerned with the way in which the firm’s information systems can be harnessed to create a competitive advantage. Where the aim is to reduce costs and increase efficiency in each one of the functions. Firms such as Skype have a vision of creating a longer term competitive advantage in the VOIP market. They aim to do this by satisfying the customers and being a leader in the market.