January 16, 2011 6:15 pm

Skype chief in call to arms

Skype plans to lift its headcount by nearly 50 per cent this year and become a player in Silicon Valley in an effort to reinvigorate its lacklustre product development processes and capitalise on its viral consumer growth.

The hiring spree marks an attempt by Tony Bates, Skype’s new chief executive, to inject urgency into a company synonymous with online voice and video calling. While its brand recognition and reach put it among the top handful of consumer internet companies, Skype has been slow to come up with a broad “premium tier” of services for which it can charge users – something Mr Bates aims to put right in a hurry.

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The company’s engineers may have come up with many great ideas, Mr Bates said in an interview with the Financial Times, “but getting those ideas into people’s hands is what Skype needs to do”. And, pointing to the experience of his previous job as head of the division at networking equipment company Cisco that caters to big businesses, he added: “You’re going to see a rhythm and cadence of product release that’s going to increase.”

Skype accounted for 25 per cent of international calling minutes last year, according to figures published last week by TeleGeography and affirmed by the company. That is up from 12 per cent a year ago and 9 per cent the year before that, pointing to an acceleration of its impact on traditional telecommunications carriers. Some 40 per cent of its minutes are spent on video calls.

But only 8m of the 124m people who use the service each month pay for the privilege, mostly to make calls to, or receive them on, regular telephones. That generated net income of $13m on revenues of $406m in the first half of last year.

To Mr Bates, a Briton who has spent 15 years in Silicon Valley, the weakness in Skype’s business has been clear: a shortage of product engineers capable of pushing out new products faster. The Valley, with its expertise in software and the consumer internet, has these in abundance.

Skype currently employs 850, with most of its engineers in Estonia, though its disparate operations include a Luxembourg headquarters, marketing operations in London and audio-visual engineering in Stockholm. Mr Bates said he plans to hire up to 400 new staff this year, with 80 per cent of those in Silicon Valley.

With an initial public offering pending, Mr Bates refused to discuss Skype’s business plans – though his background in communications for the business market points to what others close to the company have said is its biggest opportunity.

“The world of enterprise is changing very quickly,” said Mr Bates. “It’s less about [communications] inside the firewall, and connecting to one or two partners. It’s about reach.”

Many people already use Skype in their work lives, though it is not officially sanctioned by their IT departments, and the company hopes to use that foothold to extend its influence. To do that, Mr Bates said he is considering offering the so-called Service Level Agreements that most companies require from their suppliers to assure a guaranteed quality of service, and adding new services for businesses.

His cause will not be helped by a network failure that interrupted service across Skype for a day at the end of last year. He denied, however, that this conspicuous event highlighted any flaw in the “fundamental architecture” of Skype’s peer-to-peer network, but said it had revealed a lack of capacity in parts of its network.

While pushing to add new services, Mr Bates is also racing to consolidate Skype’s position as the internet’s best-known communications service, continuing the recent spate of deals that have put Skype on more wireless networks and TV sets.

“Our ambition is to have the broadest reach across the most platforms,” Mr Bates said. “I don’t see why we can’t cover the planet. The objective should be billions.”

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