June 17, 2004 5:59 PM PDT

Yahoo scraps enterprise messaging

Yahoo confirmed on Thursday that it is no longer selling a version of its popular instant-messaging service for corporations, ending the Web portal's attempt to sell IM as a software package.

The dropping of Yahoo Messenger Enterprise Edition marks the end of the Web portal's now-defunct enterprise software division. The unit was created in 2000 to sell customized Web portals and videoconferencing services for internal use in corporations. But in October 2003, Yahoo scrapped the division and melded its businesses with their consumer counterparts.

In an informal interview earlier this week, Yahoo's chief information officer, Lars Rabbe, said the enterprise instant messenger was shelved because Yahoo is largely a consumer company and is not structured to take on the kind of support tasks and other responsibilities that come with selling corporate software.

The move will consolidate Yahoo's consumer and enterprise products into one product package.

"We have reorganized our instant-messaging business to optimize our ability to leverage the Yahoo network, whether our customers are at work or at home," Lisa Pollock Mann, senior director of Yahoo Messenger, said in a statement.

A Yahoo representative declined to comment Thursday on when the company had stopped selling the service.

To the Big Three Web portals--Yahoo, Microsoft's MSN and America Online--selling instant messaging to companies has sounded like a good idea. The companies all offer popular, free IM clients that millions of Internet users have downloaded. The messaging technology lets people exchange messages in real time, and it has evolved features that let users play games, make phone calls and hold videoconferences.

Instant messaging has made its way into companies as well. Some 85 percent of all enterprises in North America use a form of IM in their networks, according to a survey by the Radicati Group, a research firm. This penetration was mainly spurred by employees downloading Yahoo, AOL or MSN software to keep in touch with personal and professional contacts.

However, instant messaging flourished in businesses without the oversight of corporate information technology departments, leaving many system administrators concerned about the technology's safety against viruses. Some industries regulated by the federal government, such as the financial services and health care industries, are concerned that the use of IM in their offices might violate compliance or privacy laws.

The Big Three saw in this an opportunity to sell adapted versions of their free service to companies. The revamped software included features such as conversation logging, authentication and identity management. The companies also partnered with third parties such as IMLogic and Facetime Communications to add these applications to their IM products.

But consumer Web companies often have a hard time becoming enterprise software vendors, some industry watchers have noted.

"The market has shown that you cannot bring continuity from the consumer market to the enterprise market," said David Gurle, an executive vice president of Reuters Messaging. "You need to think about the enterprise market very differently than the consumer market, which doesn't pay you directly."

In addition, experienced vendors such as IBM and Sun Microsystems have begun offering their own IM products through their established sales channels.

Like Yahoo, AOL has retrenched its enterprise IM division. It has opted instead to sell add-ons such as video conferencing for a fee. Microsoft has focused less on MSN Messenger and more on its Live Communications Server--which combines IM, Net phone calling and videoconferencing--as its enterprise communications product.

CNET News.com's Michael Kanellos contributed to this report.

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Enterprises need enterprise solution to IM issue
This article is right on. Enterprise needs are very different. One very cool IM product the for enterprise is Sigaba Secure IM, developed by an actual enterprise security company to specifications of large organizations in regulated industries (financial svcs, healthcare and gov't primarily). Thanks for making some good points.
Posted by ps_dunne (3 comments )
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