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Where the growth of IM will take your business
Analysts make their predictions

By Anthony Plewes

Published: Thursday 23 October 2003

There's no doubting the use of IM is on the up but where do the experts see it heading? Anthony Plewes has been asking them...

Questioning instant messaging pundits, you’ll find they all agree on one thing: the burgeoning IM market is destined to make a big impression in the enterprise.

Analyst firm Radicati believes the number of daily IMs sent is increasing at a steady rate, growing from 582 billion messages sent per day in 2003 to 1,380 billion in 2007. "Growth will be largely spurred by the corporate IM vendor segment," says Genelle Hung, an analyst at Radicati. "IM is going to be incorporated into most messaging and collaboration applications that are in use today."

The market penetration of enterprise IM has already been impressive. According to analysts at Yankee Group the first half of 2003 was a period of significant growth. The progress seen by the leading enterprise IM players, AOL, FaceTime, IMlogic, IBM Lotus, and Yahoo!, ranged from 46 to more than 100 per cent across both the consumer markets and enterprise sector.

Yankee’s research predicts that the number of business IM sessions will grow at 150 per cent every year over the next three years and that the number of enterprise IM users will grow from about 65 million in 2003 to just over 350 million in 2005.

Although targeted enterprise IM solutions exist, such as those from IBM Lotus and Reuters, many users are still using the public IM networks. Yankee says that the consumer and business IM spaces are intimately linked and will remain so for the next few years. This is driving the business of the three leading IM gateway providers, Akonix, Facetime and IMlogic, who have all seen significant deployments of their solutions. These gateways help enterprises manage public IM use on their networks by providing identity management, security and central logging, for example.

According to Gartner Group, enterprises in the last 18 months have focused on securing public network IM use. Attention is now turning to developing a strategy of integrating IM and presence information into businesses' real-time collaborative environment. In the patented Gartner 'Hype Cycle', the analyst house believes by spring we will have entered the 'Peak of Inflated Expectations'. The strategy of IM integration will be largely led by email application vendors that also have IM applications.

Gartner also expects Microsoft’s release of its Live Communications Server to prompt many enterprises to explore IM in a more organised fashion. This product essentially integrates Microsoft’s desktop product suite with IM functionality. Gartner expects a major shake-up of independent IM application vendors by the middle of next year. "The advantage of Microsoft is its ubiquity and control of the desktop and email infrastructure," says Gartner analyst Lou Latham. "They will hold a lot of currency."

The two other major public IM network providers are also making a major play into the enterprise area and will represent a serious challenge to the enterprise IM players. Gartner analyst Latham, however, says AOL will continue to be associated with the consumer space despite its massive installed base.

"AOL is not going to become a credible enterprise infrastructure vendor any time soon," says Latham.

And although Yahoo IM is much smaller than AOL it benefits from more of a mindshare in enterprises through its financial portal.

The growth in IM in the consumer sector has implications for other technologies, says Yankee. These include the expanded use of IP-based audio and video communications. It expects the business impact of IM to be significant if the technology vendors rise to the challenge of integrating IM functionality into enterprise applications.

"There are several key applications where IM, particularly the embedded 'presence-awareness' of IM is already proving very useful and productive," says Paul Ritter Yankee’s programme manager for collaboration and content management. "CRM applications and corporate portals will be two of the biggest growth areas for IM integration initiatives. Many firms have already begun integrating their IM solutions with their corporate directories, which has helped firms achieve tangible improvements in metrics such as call centre productivity and project management effectiveness."

Ritter says that in three to four years' time most large enterprises will have deployed IM as part of an integrated communications infrastructure, enabling users to IM their colleagues, launch a web conference and share documents and files.

Radicati's Hung believes that IM should be viewed as another communications medium and that enterprises should not be expecting any 'revolutionary' applications to emerge from it. "I'm not sure how ‘unusual’ anything will be," says Hung. "It's more developmental at this point."

Yankee says that the two biggest concerns in the business community are which type of IM technology will gain the largest acceptance and how long it will take for wide-scale IM network interoperability to emerge. The analyst firm believes at best this will be 12-18 months.

Radicati's Hung is more optimistic about the future interoperability of IM networks. "I think that the most unexpected development will be the opening up of networks to be able to talk to each other – AIM to Yahoo! and MSN and corporate IM services." The sticking point that needs to be overcome is working out how to make money out of the market. "It’s quite a political decision, if you think about it," says Hung. "And we know how those usually turn out – dragged out forever!"

But it seems that interoperability will continue to be a major issue and in the short-term companies will be forced to use workarounds at the desktop level or gateways. As the industry matures, and gateways become more important, it seems likely that enterprises will not want to operate them. "Operating gateways is an ugly business," says Gartner lead IM and email analyst Maureen Grey. "A lot of organisations will not want the hassle."

Grey tips service providers to take up the slack, although she won’t be drawn on any candidates. Telcos, for example, could operate IM gateways much like they operated email gateways back in the day when email systems were incompatible.

As IM becomes more established, it is likely that the demographics of IM users will change. According to Radicati, currently the biggest users of IM are the 12 to 19 age group with 34 per cent of total users. They are followed by ages 20 to 29 with 28 per cent of users. This will be turned on its head by 2007, with the largest group of users predicted to be the 20 to 29 year-olds, with 33 per cent, followed by ages 30 to 39 with 26 per cent, with the teenage users relegated to third place with 17 per cent. This reflects the maturity of both the users and the enterprise IM market.