Instant Messaging Popping Up All Over

By Maria Trombly | Securities Industry News | April 22, 2002

Instant messaging is coming at Wall Street with both a carrot and a stick. The carrot is the way that instant messaging (IM) can improve communication and collaboration between employees-and with partners and customers. The stick is that if a company doesn't offer instant messaging to its employees, they will get it on their own-by downloading insecure, unreliable and unarchived consumer solutions for free over the Internet.

"The technology guarantees that the message was delivered," said John Casaudoumecq, Salomon Smith Barney's managing director and head of global fixed-income e-commerce. "It's near-instantaneous.There's not the same delays as with e-mails, which have to wind their way through firewalls. It's really suitable for short bursts of information and it allows you to have an online meeting among a number of participants in real time.IM is a valuable tool and over time will become an even more valuable tool in our business."

According to a study released this week by Stamford, Conn.-based Gartner Group, more than 75 percent of major global financial institutions describe their efforts to improve collaboration through technology as important to critical-and over half plan to increase spending in this area over the next two years.

In addition, more than half are already using or piloting IM and plan to extend this capability externally to reach partners and customers, according to Ed Cordin, a director at Gartner Consulting and author of the report. But the ubiquitous application also has a dark side. Actually, two dark sides.

Most people know about IM from their experience with the AOL, Yahoo! or Microsoft consumer versions of the product-easy to use, free to download and contagiously appealing. In fact, it's so appealing that users will download it even if they're instructed not to by management. According to Robert Mahowald, an analyst at Framingham, Mass.-based International Data Corp., up to 70 percent of businesses are using free, consumer-oriented IM-whether they know it or not. But consumer IM is ill-equipped to handle business traffic because of security and monitoring issues, he said.

"These consumer IM services have allowed users to trade larger and larger files," he said. "And the whole transcript of that session is on the Web someplace, instead of in your back office where it can be audited to make sure it's in compliance with company policy."

Other problems associated with consumer services include reliability issues, security problems, spam, impersonation, viruses, lost messages and lack of archiving. The latter is particularly important for securities firms.

According to SEC and NASD regulations, instant messages have to be treated like emails-they need to be archived and managed just like other communications. Individual firms may have additional requirements for an enterprise IM system.

For example, at Salomon Smith Barney, the ability to manage the IM community-to decide what users have access to each other-was a consideration. Information security was also a requirement, said Casaudoumecq. Since the firm was already participating in Communicator's SecurityHub, it decided to participate in the company's Hub IM beta trial last summer and has had it in full production since early March-both for internal use and for communication with customers.

Salomon Smith Barney's fixed-income unit has some 3,200 users on Hub IM-the service boasts a total address book of over 30,000 names, with about 5,000 to 6,000 people logged in on any given day.

"I have used it both to communicate with clients and with colleagues," Casaudoumecq said. "It's very easy. This particular product suits the bulk of our needs quite well."

The main problem with instant messages today is that there are too many options-and most of them are incompatible with one another. IM is following in the footsteps of another communication medium-e-mail.

"If you go back to the early days of e-mail, you had many e-mail systems that couldn't work outside the organization," said Michael Gartenberg, research director at New York City-based Jupiter Media Metrix. "But eventually we settled on standards."

Today, there are many competing versions of IM. For example, Bloomberg has offered IM as part of its service since 1982, using an e-mail-based system for an average of 7 million messages a day. But while users can send and receive emails from outside the system, they can't instantly message, say, someone using AOL IM or MSN Messenger or one of the many enterprise IM systems.

The fact that the messages move through a proprietary network makes it more reliable and secure, said Bloomberg LP spokesman Chris Taylor.

It also allows additional features-attachments, Bloomberg screen grabs, and real-time collaboration with fellow users.

In the long term, said Robert Batchelder, an analyst at Stamford, Conn.-based Gartner Group, IM will have to move to a federated model-a number of overlapping communities in which individual institutions decide which users get to talk to each other.

Communicator's Hub IM could be the model for this kind of system, Batchelder said. "Whether this model will scale isn't clear," he added, "because it hasn't been tested that way."

Another proprietary messaging system is IBM's SameTime product, which claims 83 percent market share in the general business world. According to Jeremy Dies, offerings manager for real-time collaboration at IBM, interoperability is not so much a technological hurdle as a business one.

"For the public IM networks, their value is in the community," Dies said. "The technology has existed for years to tie these networks together. The barrier to adoption of a common standard is a business challenge because they want to maintain the community that they built."

The instant messaging industry is currently at an inflection point, with no clear standard, he said. "It's a huge problem-you have people with four or five buddy lists running on their machines. It's a nightmare. We do believe that a standard will emerge and that it's absolutely necessarily."

Dies said IBM will embrace open standards. "Once it's clear what the standard will be, we will adopt it quickly."

One company that hopes to jump start the process and solve the fragmentation dilemma is Reuters, which is now testing a free enterprise IM system based on an open standard-the session initiation protocol (SIP).

Twenty-five leading global financial institutions are working with Reuters and Microsoft to develop Reuters.Net Messaging, including: ABN Amro, Salomon Smith Barney, Credit Agricole Indosuez, Deutsche Bank, DKB Information Systems, Dresdner Kleinwort Wasserstein, HSBC, Societe Generale and Tokai International Securities. The service is expected to go live in the third quarter of this year, said Lewis Knopf, managing director of collaboration services in Reuters' business technology group.

Like other enterprise IM systems, Reuters.Net Messaging will be built around security and auditing ability, and will be available as a free download.

"You do not have to be an existing Reuters customer," Knopf added. "Because we were a bit late in the messaging game we decided that one of the things that we would do is put this up to the entire industry and do it for a price that made sense-and that was free."

Reuters will sell auxiliary services however, such as audio and video messages, or sophisticated access control.

"We also will provide, for a fee, a toolkit to customers that will enable them to do the integration into their own applications," Knopf said.

Until a common messaging standard is universally adopted, however, some IM providers are working on workarounds.

Charlotte, N.C.-based First Union Corp. is currently installing a product from Foster City, Calif.-based FaceTime Communications to respond to employees needs to communicate with customers-who used multiple networks.

First Union has been using an IM application that it built itself two years ago, said Joe Belciglio, First Union's trading technology chief. But employees couldn't use it to connect to people outside the company-which is where FaceTime comes in. "It allows us to have the proper security control and meet our compliance requirements while at the same time allowing users to connect to different IM services like AOL," Belciglio said.

At Chicago-based Divine's MindAlign, which combines standard IM with real-time special-purpose channels (or chat rooms), users will able to combine buddy lists from multiple services. This means that if a particular portfolio manager's firm has decided to go with MindAlign but his customers prefer using their various favorite consumer messaging product, he doesn't have to remember which customer uses which service and keep track of all their different screen names.

"The AOL license agreement is very restrictive and we're working on ways to get around that," said Dave Zaret, director of collaboration architecture. "Other systems are much more open."

Jeff O'Mara, director of marketing at Redwood City, Calif.-based Slam Dunk Networks, said his company is also in discussions with other providers to offer interoperability, though there's nothing he can announce right now.

Slam Dunk, in partnership with New York City-based e-Vantage Solutions, offers a secure, archivable messaging services that is used by Deutsche Bank and other financial services customers. Another approach to the fragmentation issue is to make IM transparent and ubiquitous by embedding it in applications.

A trader is using a trading tool and wants to talk to another participant-one click and there's a connection through a built-in messaging service, without having to leave the trading application. A customer at a brokerage Web site who wants to talk to a broker can be instantly connected-without leaving the browser, and without having to download a messaging client.

Gartner Group predicts that, by 2005, IM will be integrated into more than half the applications that businesses use to directly interact with customers. New York City-based LivePerson said it has more than 100 financial service clients, including Prudential and Ameritrade.

It's Web-based, so customers don't need to download a client's applications-they simply go to their brokers' Web site and chat from there, said Tony Pante, LivePerson's EVP of product development and marketing.

New York City-based All Instant also offers a Web-based IM product that can be integrated into brokerage portals or third-party trading platforms, including SunGard's.

"We don't see IM as a separate product but as a component of a product," said Steph Sebbag, All Instant's EVP of sales and marketing. IM is commonly used in the securities industry to send alerts to customers, including on wireless devices.

Micro Design Services Llc turns this around with a tool that lets customers send instant messages to their wireless-device-wielding brokers.

It's transformed the way he does business, said Kenneth Polcari, managing director, Polcari/Weicker, a division of Garban Corporates Llc. Polcari spends his day on the floor of the New York Stock Exchange scribbling instant notes to his customers and answering them through Micro Design's MarketLook Information System.

"It eliminates the phone calls," he said. "Anytime, my customers can request information on individual stocks. It gets routed immediately to my hand-held, I go out and get that information, write it down on my hand-held, hit the send button and it goes right back to the customer."