AOL, Yahoo create vacuum in enterprise IM market

The high-profile exit of two industry giants from the enterprise instant messaging business is a misleading indicator of the industry's health.

Within days of each other, two titans of the consumer instant messaging market announced that they have ditched their enterprise IM offerings, apparent victims of their own success.

While the market for enterprise-grade IM technology is on the upswing, many businesses are reluctant to pay for IM when they can have their employees use a consumer version for free, according to analysts, software makers and others. And some organizations simply don't feel that IM is the kind of critical business tool that e-mail has become.

Late last week, Sunnyvale, Calif.-based Yahoo Inc. announced that it will drop its Enterprise Edition Instant Messenger product. On Monday, America Online Inc. said it has formed a partnership agreement to migrate its AIM Gateway customer base to Waltham, Mass.-based IMlogic Inc.'s IM Manager offering -- a move that one industry analyst said is an attempt to reach the small and medium-sized business (SMB) market.

Michael Osterman, president of Osterman Research Inc., in Black Diamond, Wash., said that Dulles, Va.-based AOL can now focus more on the SMB market, instead of going head to head with players such as Microsoft and IBM Lotus in an already sluggish market.

'Free' is an offer that's hard to refuse

Enterprise IM can attribute some of its slow start to a close relative: free IM offerings like AOL Instant Messenger and Yahoo Messenger, which account for a large part of the 320 million consumer IM users worldwide. By comparison, there are 63 million enterprise-only accounts.

"[IM applications] have been available far too long for free in the public markets," said analyst Genelle Hung, of Palo Alto, Calif.-based Radicati Group Inc. "Most organizations have been pretty unwilling to budget on [enterprise IM] that promised delivery but offers very little proof of that."

Hung said IM in the workplace has also been hampered because users are uncomfortable with relying primarily on IM as a way to communicate with their co-workers. This reluctance can be attributed to culture rather than technology, said Joe Hildebrand, chief architect with Denver-based Jabber Inc., an enterprise IM software maker.

"Its short messages, versus long rambling e-mail-like messages -- sending a 'hi' or 'hello' before speaking -- these are not necessarily questions a vendor can answer," Hildebrand said. "Sometimes it falls on the corporation to answer for the users."

However, like corporate e-mail did a decade ago, enterprise IM is beginning to take root, Hung said. Consumer IM blazed the trail, then enterprise offerings from large vendors followed, including IBM Lotus' Sametime -- now known as Lotus Instant Messaging -- and Microsoft's Live Communication Server. Several other software makers offer enterprise IM products as well.

Less ringing, more pinging

Today, IM is used in 85% of enterprises in North America, with an average of 158 messages sent by each user every work day, Radicati found in recent research.

"Customers are starting to find they don't use their desktop telephones as much," Hildebrand said. "One client said their [IM] system went down and it was more important than the telephone system going down."

There's also another enterprise trend that bodes well for IM.

Some users are finding that "red flagged" or high-priority e-mail messages are not received with the same sense of urgency that they once did, said Brian Holdsworth, a senior product manager with Microsoft. Users have started to look for applications that provide a real-time indicator of whether someone is online and active, known in the industry as "presence."

Another expert said increased enterprise IM growth over the past year is also due to the growing integration of IM's chief function -- messaging -- with other productivity and business tools.

"[The enterprise] is not just deploying an EIM system as a standalone, they are tying it into calendars, portals and archive systems, directories, as well as CRM systems," said Daniel Graves, a group product manager with Santa Clara, Calif.-based Sun Microsystems Inc.

Integration will boost IM's value

Gordon Haff, a senior analyst with Illuminata Inc., of Nashua, N.H., said integration is now a driving factor in enterprise IM purchasing decisions. Two other factors are security and control, he said.

Haff said organizations will continue to adopt enterprise IM as a part of a general communication trend of integrating land lines, e-mail, cell phones and mobile devices with enterprise infrastructure.

"For the occasional message, [consumer IM] makes sense," Osterman said. "But if you truly want a business tool, then you really want to go with a full blown IMlogic, FaceTime or Akonix to provide features."

And with the adoption of enterprise IM comes the attendant security risks, said Radicati's Hung.

"Over the past 12 months, IM clients have advanced significantly and are no longer limited to text only. … This has also introduced a whole new level of security holes," Hung said.

A new annoyance emerges

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One such hole is the potential for IM spam -- or "spim" -- which is not necessarily dangerous to a network, but can still hamper productivity as users deal with it, she said.

There is an immediate need for filters to block holes created by enterprise IM, which can also allow malicious hackers to bypass network firewalls. While IM does allow the predefined blocking of unwanted messages, it is impractical to simply block everyone not on your define list, especially since that would mean potentially blocking customers, Hung said.

The Radicati Group also warned in a recent report that many IM clients do not use encryption. But since IM viruses are not currently capable of self propagation, organizations' networks are not vulnerable unless their users actively click malicious links.

And despite the exit of Yahoo and AOL from enterprise IM, there should still be plenty of corporate accounts that will need protection from such behavior.

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