Commentary: This is not your teen's IM

By Forrester Research
Special to CNET News.com
February 18, 2003, 1:40PM PT

By Charles S. Golvin, Senior Analyst

Instant messaging use is exploding. But the growth in IM obscures a more powerful technology story.

IM is just the first application to exploit "presence"--the online status of a person or object. As presence permeates new applications, products and processes, consumers and businesses will communicate, conduct transactions and work in fundamentally different ways.

IM is growing faster than any consumer communication technology--eating away at landline use and displacing personal conversations. In its first five years, IM has grown 30 percent faster than e-mail did at its inception. In the United States today, 44 percent of online consumers and 30 percent of the adult population report that they use IM regularly, a whopping 57 percent increase over 2001. IM is also becoming a critical business tool. Open-source vendor Jabber reports more than 200,000 downloads of its IM server in the past two years, and IBM's Sametime boasts more than 4,000 installations and 7 million seats.

IM has proven itself to be a valuable communications tool. Yet its widespread adoption among consumers and enterprises, like that of e-mail in its early days, has not translated into tangible business value. Despite its popularity, IM is struggling to find a business model. Service providers are having trouble monetizing it, enterprises are unsure of how to use it in the workplace, and marketers don't know how to exploit it. All the while, consumers are frustrated with proprietary IM systems that make it difficult to connect with everyone.

The power of presence
While IM applications like AOL Instant Messenger and Sametime provide real-time communications, their real power is to deliver online status information--presence. Real-time chat--today's IM--is simply the first application to exploit presence. Tomorrow's presence-enabled applications will bear as much resemblance to the first version of AIM as a Handspring Treo does to an old Western Electric phone. Adding presence gives users more control, reanimates static processes and creates real-time alerting mechanisms.

Presence-enabled applications will not arrive overnight. Obstacles such as interoperability, IT security, privacy and cost must be overcome before presence becomes pervasive. As these impediments fall and consumers embrace new kinds of real-time interaction, presence will flourish in three overlapping periods:

• The communications era. In this first stage, presence will move beyond IM and permeate fixed and mobile voice and data networks. Carriers such as BellSouth will use Jabber to add presence to their voice-mail service, so subscribers can see their voice-mail in-box as a buddy whose status is the number of new voice messages and who left them.

• The productivity era. Presence will move beyond communications and into business applications and processes. UPS tracking systems will automatically notify an account manager when a top customer's package has a high risk of delay. UPS will then extend this system to the customer and allow him to see the real-time status of his packages without having to open a browser.

• The commerce era. In its final phase, presence will extend to products, services and transactions. When MBNA's fraud detection system kicks in for a platinum customer, it will detect her online and send her transaction details immediately. She will be able to halt the unauthorized use and to dispatch the issue in seconds rather than respond to a voice mail when she returns home.

Premium services
During the next two years, IM will mature as a communications application, shifting from a loyalty application to a revenue generator as service providers extend presence into other channels. Revenue opportunities will come from these areas:

• Presence services. Consumers pay today for mobile IM, and wireless operators already have presence built into their networks. In the future, consumers will pay for more sophisticated presence services



		Related story Microsoft aims to tap 'Net generation' New IM software is geared for teens but could extend to corporate work groups.

like automatic filtering of unwanted calls, prioritizing of incoming calls and the availability of auto-locator services that present a map with the location of stray children or lost colleagues.

• Unique content. When buddy lists are no longer exclusive to a provider, carriers will retain users with content exclusive to their network. When a major merger is announced, only Yahoo Finance premium subscribers will get the opportunity to chat with an influential CSFB analyst on the implications of the deal.

Core applications
From 2003 through 2006, with IM communications in place, enterprises will push presence into applications and processes that drive business efficiency. During this productivity era, presence will provide the best payback in these areas:

• Manufacturing. Presence helps deliver real-time information that accelerates exception handling. When an assembly line machine begins to run hot and requests service, it can notify GM that the molded bumpers it produces will be in short supply and that capacity will have to be shifted to another line.

• Collaboration. Presence information will ease collaboration and enhance employees' self-sufficiency. A manager with a team in the field doesn't have to arrange a telecommunications bridge or track down the team for an impromptu meeting. When he initiates the call from his IM client, the PBX will find each team member, notify the manager of their presence status and automatically create the conference call.

• Sales. Embedding presence and notification into the sales process improves close rates and ensures that leads don't fall through the cracks. When a Sprint field support engineer notes in Siebel that a customer's network is running at full capacity, an account manager will be notified immediately of the new sales opportunity. And the sales manager can track activity and progress.

The commerce era
Beginning in 2005 and continuing through 2010, with internal applications and processes presence-enabled, marketers will turn next to their customers. The challenge of overcoming customers' privacy fears and the high cost of embedding presence sensors in the transaction process--like radio frequency ID tags--will make this the last and longest of the presence eras. But presence will enliven and improve these realms:

• Merchandising. Marketers will extend inventory management systems to alert customers about product availability. J.Crew will not only notify a customer when the cashmere sweater she abandoned in her shopping cart becomes available in burgundy, but it also will knock off an additional 15 percent for the impulse buy.

• Selling. Online transactions take longer than those in the physical world because steps like payment and fulfillment are no longer atomic. The details of these stages will be reflected in real time via presence. eBay Motors' premium users will watch auctions automatically update the current price and remaining time, while their escrow services will reflect the exchange of funds and goods as it occurs.

• Service. Presence-enabled communications and natural-language processing tools will allow customers to query data stores interactively. Dell Computer will put a text interface on its ?HowTo? knowledge base so that, with a quick IM exchange, a customer can learn how to install his new DVD burner.