Firms Aim at Business Networks

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By Kim Hart
Washington Post Staff Writer
Wednesday, July 19, 2006

Microsoft Corp. and AOL are making separate bids this week to rewire the way businesses communicate, tapping into new technologies for e-mail, instant messages, Internet calls and video conferences.

Microsoft yesterday announced a partnership with Canadian telecommunications company Nortel Networks to help companies make the transition from traditional phone systems to software-based networks. Today, AOL is rolling out a new business-oriented instant-messaging program that ties in WebEx video-conferencing services and Microsoft's Outlook e-mail program.

The new alliances hope to reduce costs, increase productivity and simplify communications tools for businesses, the companies said.

Nortel, which has long been an industry leader in providing hardware for corporate phone systems, expects to bring in more than $1 billion in revenue from its partnership with Microsoft, the world's largest software maker. The companies plan to work together over the next four years to develop software for Internet calling, instant messaging, and voice and video conferencing. They plan to share the investment in development, marketing and integrating the new technology into existing systems.

"Our partnership fundamentally changes the telephone landscape with the software approach," said Mike S. Zafirovski, Nortel's president and chief executive. "This will drive down the cost of business communications. . . . The bottom line is that we take the risk out of the transition."

Some businesses have been slow to adopt Internet-based communications tools because of the complex technology that surrounds them, said Robert Whiteley, senior analyst with Forrester Research Inc. The partnership bodes well for smaller businesses that do not have the resources to put Internet-based systems in place, he said.

"Nortel is good at providing the underpinning technology, and Microsoft is good at creating the applications," Whiteley said. "In the past, users had to bring those together themselves."

Businesses are interested in the cost-saving possibilities of Internet-based communications, while telecom and software firms are hoping to capitalize on that transition, said Samir Sakpal, an industry analyst at the research firm Frost & Sullivan.

The Internet-based communications market will experience healthy growth this year, according to Forrester Research. A recent survey showed that 64 percent of U.S. companies are shifting their voice traffic to an Internet network.

Cisco Systems Inc. and International Business Machines Corp. are also collaborating to converge data, voice and video on Internet networks, and analysts expect similar partnerships to emerge as telecom companies try to compete.

AOL is also looking to revamp business communication with its new instant-messaging program, AIM Pro, which combines instant messaging, e-mail, desktop sharing, and voice and video conferencing into one application.

The AIM franchise, which this year is celebrating the 10th anniversary of the Buddy List, is used by 14 million U.S. workers, according to Osterman Research Inc.

AOL is trying to reach a larger share of the at-work instant-messenger users, said John McKinley, president of AOL's digital services division. "We should have a version of AIM to reflect the role it's playing at any part of the day," he said.

Radicati Group Inc., an industry research firm, estimates that 135 million people use IM programs at work, and that number is expected to grow to 477 million by 2009.

"For the longest time, key players have been wanting to move into the enterprise IM space," said Sarah Radicati, the group's president and chief executive.

But persuading business owners to adopt the programs has been difficult. Two years ago, AOL, Microsoft and Yahoo Inc. linked their instant-messaging services for use at the workplace, but corporations did not jump on board. This time, Radicati said, companies will probably be more open to AOL's program.

"IM used to be viewed as just a toy; now it's viewed as an important communications tool," she said.


© 2006 The Washington Post Company

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