Sunday, August 20, 2006

skype face value

Face value

Communicating the Skype way

Aug 17th 2006
From The Economist print edition

Sten Tamkivi, the Estonian manager of Skype, is helping to change the face of telephony


LIKE most people doing important jobs in Estonia, Sten Tamkivi is alarmingly young. He is 28—practically a greybeard in a country that once had a 27-year-old foreign minister. And like many Estonians, he is reticent and modest. Asked for his job title, he looks apologetic. “I think I am director of operations,” he says. “We're not that big on titles.” Most people in his shoes would be boasting. Mr Tamkivi runs Skype, one of the software world's most subversive and fastest-growing businesses.

Founded by a Swede, Niklas Zennström, a Dane, Janus Friis, and a group of Estonian programmers, Skype's proprietary, voice-over-internet-protocol (VOIP) software allows its 113m registered users to call each other free of charge. The company makes money, on the other hand, when its customers place calls to traditional telephones—but these are still extremely cheap. Skype and other VOIP companies threaten to undermine incumbent operators' pricing structures and gradually to wipe out the traditional, high-margin telephone business.

Late last year, Skype's founders sold their share in the business to eBay, an auction and trading website based in California, for $2.5 billion, plus another $1.5 billion if Skype hits certain performance targets. Meg Whitman, chief executive of eBay, recently said that she expects Skype to bring in revenues of $200m in 2006 (though the firm is not yet profitable). Mr Zennström is Skype's chief executive and its public face, but he leaves day-to-day operations and developing the firm's software to Mr Tamkivi and his team, and Skype's research and development division is based in Estonia.

Like its product, the company's culture seems to be based on long-distance communication. Indeed, the most important internal business tool is Skype itself, particularly its instant-messaging system, Skype Chat. Its first advantage, says Mr Tamkivi, is “presence data”. You can signal whether you are out, busy, reachable elsewhere or free—and all your colleagues can see. An unanswered e-mail, by comparison, tells you almost nothing. If required, you can add a video-conference or phone call at the click of a mouse. Of particular value is the fact that Skype chats are not only encrypted but work only between people who trust each other—the best possible defence against spam. And chats allow lots of people—sometimes 50 Skype staff, Mr Tamkivi says—to communicate with each other, “for minutes or for years”. The chat history is instantly accessible to all participants: “try to achieve that with a long e-mail thread,” he says.

Here is a snatch of Skype chat where Mr Tamkivi and two colleagues are discussing a future presentation:

13:37:48 Alex Kazim says: Ott, especially need you to look at the slide where I try to explain how VOIP works. This is like me trying to explain quantum

13:41:28 Sten Tamkivi says: try the electron: VOIP can be viewed as a particle or wave at any point in time.

13:41:57 Alex Kazim says: hehe

13:42:41 Sten Tamkivi says: for added abstraction and analyst awe, describe it as a thought or a smell

13:45:03 Alex Kazim says: it's a state of mind. A veritable Tao of VOIP

13:46:07 Ott in Tallinn says: uh, you're not holding back :) by the way—according to our brandbook—Words we do not like—VOIP, Internet Telephony etc :)

13:47:03 Sten Tamkivi says: according to the same book, words we do like: share, baboon...

It is hard to imagine such informality (or healthy dislike of jargon) surviving in many boardrooms. Skype's programmers—there are around 150 of them in total, from all corners of the world, with an average age of just under 28—are a formidable bunch, but the company tries hard to seem as ungeeky as possible to its users. Skypenauts like Mr Tamkivi don't want their ingenious software to be technically fascinating—they don't even release the source code. They just want it to be very easy to use.

And it is. The people who police company networks, indeed, worry that their computers and bandwidth are being hijacked into handling Skype's calls. Like Google's Gmail, a powerful and well designed e-mail service that people often prefer to their company's own system (to the chagrin of IT managers), Skype may prove too attractive to squash. Mr Tamkivi's next big project is to move Skype beyond computers, onto gadgets that people carry in their pockets. The first Skype-capable mobile phones have come on the market; some handheld computers run it too. Another plan is to have Skype on a memory stick.

Mr Tamkivi founded his first software business at the age of 18, and he dropped out of university after a year—he says he still wishes he had a better grasp of economics. Although born in a country occupied by the Soviet Union, he barely remembers communism; it was already collapsing when he was 10. He is determined that Estonia, which is already a power in European information technology (albeit a tiny one) should make a success of capitalism. He has spoken out repeatedly against the government's xenophobic visa rules, which make it hard to hire programmers from India and China. And he wants to get the education system to sponsor foreign academics to teach computer-related disciplines at Estonia's universities. The country's programming talent pool is heavily over-fished, not just by Skype but by other software companies that appreciate its nonhierarchical, open-minded and direct business environment.

Mr Tamkivi wants to preserve Skype's original culture as the company grows under eBay's wing. Estonian companies have done well elsewhere in the Baltic states, but no Estonian-run firm has ever been as international in its staff, outlook and activities. It is not surprising, perhaps, that Mr Tamkivi's Skype chat status is so often set to “do not disturb”.

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