IM Interoperability: Its the Business Model, Stupid

Microsoft's recent deal with the three major IM services demonstrates that business dealings, not competing technology protocols, are driving the big battle for interoperability.

The tension between technology and business models is intensifying in the instant messaging market as the largest IM providers test new approaches for working together.

So far, business is winning.

Last month marked a turning point in the ability for users to communicate across the largest IM networks. Microsoft Inc., Yahoo Inc. and America Online Inc. forged an agreement for letting messages and presence information move between Microsofts forthcoming Office Live Communications Server 2005 and the three big networks—MSN Messenger, Yahoo Messenger and AOL Instant Messenger

While a far cry from broad interoperability, the deal shone more light on the fact that business issues, and not technological ones, are the major bottleneck to interoperability. As part of the deal, Microsoft officials have said, the IM networks will receive a share of license revenue from the interconnection feature in LCS.

Details of the financial arrangement remain scarce, but analysts and industry observers say the Microsoft deal could point to an IM interoperability future built more on business agreements than on any common messaging protocol.

"Everybody wants interoperability, but everybody wants it around a business model that works for them," said Royal Farros, chairman and CEO of messaging vendor MessageCast Inc., in Redwood City, Calif. "What the big three are trying to do is to find a way where if they open up to interoperability, they all can get paid."

Farros likened the emerging IM approach to the way telecommunication companies charge one another for calls as they transverse various network boundaries. The enterprise space is a fertile testing ground because, unlike the free consumer IM client, there is revenue from IM server licenses, Farros said.

Analysts have predicted that Microsofts move with its public IM rivals will lead the top networks to forge more deals with other enterprise IM players, such as IBMs Lotus division. Lotus already links with AOL in its Instant Messaging product.

But if the leading IM providers focus on specific business arrangements for interconnections, where will that leave the technological efforts toward a common protocol?

In the short term, analysts say, adoption of a common protocol will be secondary to the still-developing business models, and users and vendors will be left with multiple protocols.

AOL, MSN and Yahoo each run their services on their own proprietary protocols.

In the server space, the vendors have split into various camps. Microsoft and IBM support different implementations of a protocol based on Session Initiation Protocol (SIP), called SIP for Instant Messaging and Presence Leveraging Extensions (SIMPLE). Meanwhile the Extensible Messaging and Presence Protocol (XMPP) became a standard through the Internet Engineering Task Force, and it is largely backed in the open-source community and through enterprise IM vendor Jabber Inc.

For its part, Denver-based Jabber has acknowledged that XMPP is far from a single, widely adopted standard. Jabber, which competes with Microsoft and Lotus for enterprise customers, last month responded swiftly to Microsofts deal by announcing plans for a gateway between its Jabber XCP product, based on XMPP, and IBMs version of SIMPLE used in Lotus Instant Messaging.

"XMPP, SIP and SIMPLE needed to cooperate and work together, and at the end of the day, we want to allow our customers not to make a specific protocol decision but an application decision," said Rick Emery, vice president of business development at Jabber.

Jabber expects to release the gateway in the fourth quarter of this year and to release additional interoperability between XMPP and SIP implementations.

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