June 22, 2004 5:22 AM PDT

AOL quits enterprise IM game

America Online will no longer offer its flagship instant-messenger software for businesses, the company said Monday, as the so-called enterprise IM segment appears better suited to more established applications vendors.

The announcement that AOL is ditching its AIM Enterprise Gateway package comes only days after Yahoo, one of AOL's closest competitors, said it was pulling the plug on its own enterprise IM software. AOL said it will transfer existing users of its applications to a similar program offered and maintained by IMLogic, which previously designed and supported features of the Internet service provider's enterprise IM.

AOL's move out of enterprise IM underscores the lack of success the company, and its rivals, achieved in luring businesses to pay for software that many workers were already using for free. Available for monthly or annual fees, the enterprise tools typically included features not available in gratis IM software, such as conversation logging, authentication and identity management. AOL representatives said the company had signed up only about 150 companies to pay for AIM Enterprise Gateway.

In defending its decision to terminate the product line, AOL officials pointed to an "evolution" in the market for business IM and said they will instead follow a strategy of marketing to existing end users who log on to their accounts while at work. AOL said it would also continue to partner with companies such as IMLogic to offer business tools via IM.

At least one expert believes that there remains a significant opportunity to market IM software and services to businesses, but he said AOL's consumer image made it hard to convince corporations to buy in. Charles Golvin, an analyst at Cambridge, Mass.-based Forrester Research, feels that outfits such as IBM's Lotus group, Microsoft and Oracle have a better chance to effectively deliver IM for businesses.

"IM is all about presence and availability, which means to operate it, you need to have a strong network, and that's what the big guys have," Golvin said. "IM for business is probably better served as a part of a larger collaborative software package than as a stand-alone."

Golvin said AOL had the necessary backbone to make enterprise IM work but that it just could not shake its reputation as a company that serves consumers, not companies.

"AOL recognized that they were stepping away from their core services and that despite the good opportunity, it just wasn't in keeping with their brand," Golvin said. "AOL has such a strong consumer orientation that it was really hard to plead their case to businesses."

It is believed that some 85 percent of all companies in North America harbor some form of IM activity on their information technology networks, but AOL and Yahoo's penetration was driven mostly by employees downloading software to keep in touch with personal and professional contacts.

 

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