After Amazon, which has become an essential part of lockdown life, Microsoft has emerged as one of the major beneficiaries of the coronavirus pandemic.

With millions of workers around the world confined to their homes, the telephone, chat and video conferencing tool that the company acquired in 2011 for $8.5 billionSkype, has seen 70% increases in the number of people now using it on a daily basis, to over 40 million. That’s impressive by any standards, but nothing compared to the 1000% increase in video calls registered in March by Microsoft’s other videoconferencing and collaboration toolTeams. These are two very different options, and illustrate a product portfolio in transition.

Skype is a consumer product, a tool with the end user in mind that provides traditional telephone calls, chats and video calls. Skype’s fundamental value proposition was to avoid the expensive call rates of telephone operators. When Microsoft, during its lost decade under the disastrous leadership of Steve Ballmer, acquired Skype, it did so because its name had become a verb. However, technology has moved on since then and there are any number of competitors out there offering the same service.

Teams is a different animal: unlike Skype, it was developed entirely by Microsoft in response to the success of remote collaboration packages such as Slack. In fact, when Microsoft launched it in 2018, Slack reacted by publishing one of those ironic full-page ads on the back page of the New York Times welcoming it. Born as an Office tool and included in its bundle for free, Teams far outperformed Skype in functionality because it was designed directly for collaboration rather than just calls, video conferences or chats, which led Microsoft to abandon Skype for Business, which is due to be withdrawn in July 2021.

The pandemic has encouraged Microsoft to make Teams available to a wider public. It announced this on March 30, adding that Skype, which has a strong installed user base, would remain active. However, it is clear that maintaining Skype when you have a “home-made” application that outperforms it in functionality makes little sense, and even more so given that Skype won’t be competing with Teams in the corporate environment. Microsoft continues to provide Teams with new functions, and although in some cases, such as background blurring, these will be incorporated into Skype, it is unlikely that this will continue in the future. Will we see Skype incorporate the advanced feature announced yesterday by the Teams development people to filter out noise, including keystrokes, dogs barking or kids playing, from video conferencing? The difficulty of keeping two products in its portfolio with parallel features and in an environment that requires so much investment to stay competitive is a strategy that, logically, cannot be sustained in the long term. On the other hand, few people realize that Skype, in many ways, is a tool that, in terms of video quality or simply aesthetics, is starting to look dated. I could see Microsoft putting its product portfolio in order, setting a date for Skype’s retirement, and asking its users to migrate to Teams in the not-too distant future.

Wired, in a comparison of video conferencing tools, defines Teams as a tool suitable “for Microsoft executives”, describing it as “fundamentally a clone of Slack, just more complex and microsofticized to the point where if you’re not immersed in Office and Outlook, it’s probably not a good solution for you.”

In reality, the comparison is quite unfair and misleading: firstly, because Teams is not a video conferencing tool, but goes much further in supporting collaboration, and comparing it with toys like Houseparty or specialized apps like Zoom or FaceTime makes little sense. Secondly, because Microsoft has been opening up its environment in all senses for quite some time now, and even for an Apple user like me, Teams is perfectly compatible.

We shouldn’t be surprised that Teams is emerging as one of the big winners of the lockdown, bearing in mind Microsoft’s strong penetration of the corporate environment: before the pandemic, the many millions of Office users around the world saw Teams as a tool that was there and whose logo sounded familiar, but which they never used. When we finally emerge from this, a considerable number of users who were not used to working from home will have become accustomed to using Teams on a regular basis in their day-to-day lives, and may continue to do so.

An event as unpredictable as a pandemic has found Microsoft not only very well prepared and with its homework done, but even with the possibility of playing two cards, with two options, each valid for different audiences and markets. It will be interesting to see how this plays out for Microsoft.


About the Author

This article was written by Enrique Dans, professor of Innovation at IE Business School and blogger at enriquedans.com.