Instant messaging is making the transition from teenagers’ gadget to corporate communications tool. Parveen Bansal reports.

Instant messaging (IM), like text messaging (SMS on mobile), is most often associated with teenagers and students. However, use of IM – the real-time communication of short messages over an electronic network – among corporates is growing and researcher IDC estimates there will be over 10 million IM business users by 2004. A recent study by Vanson Bourne Research, conducted in the UK, on behalf of FaceTime Communications, finds that, although relatively immature in its use in the UK, around half of the investment community surveyed admits that use of IM networks is widespread within their organisations. Meanwhile, the adoption of IM in the US financial community is between 12 and 18 months ahead of Europe, with many of the top investment banking firms using it already.

Security concerns

IM’s explosive growth has reputedly been fuelled by the availability of free-to-use consumer applications offered by AOL, MSN and Yahoo as well as its ease of use. However, its currently uncontrolled use among capital markets institutions is giving much cause for concern over security and compliance.

In a Financial Insights research report, Instant Messaging on Wall Street, Damon Kovelsky says: “While the name instant messaging may be new to capital markets, what it does is not. Firms have sent short messages internally since LANs were installed. Several fixed-income ATS (alternative trading system) vendors in the late 1990s allowed traders to negotiate prices with each other through their ATS using instant messaging.”

But, according to Mr Kovelsky, what is new is the casual, widespread use of IM on trading desks. The real-time nature of IM makes it the perfect tool for traders to exchange information in small informal networks, which can span continents and time zones.

IM networks are of two types: public-domain IM networks (Yahoo!, AOL, MSN Messenger), and enterprise deployments such as Lotus Sametime or Reuters Messaging.

The Vanson Bourne report, Instant Messaging: Are UK banks trading in the wild?, notes that two out of the three most-used IM services are public networks, Reuters Messaging being the exception. Sixty-three per cent of those surveyed were using MSN Messenger, 33% were on Reuters Messaging and 24% were using Yahoo Messenger.

“Traders working in the energy sector have informally standardised on Yahoo! Messenger as one of their primary business tools,” says Glyn Baker, business development director at FaceTime Communications.

What makes IM popular is that it offers an intimate and interactive way of communicating, similar to the telephone but is less intrusive, and the ability to conduct multiple conversations at the same time is also attractive.

The presence-detection feature of IM is especially useful. By integrating the IM tool with a company’s directory, it becomes possible to tell whether a person is available at their desk or not. It may be integrated even further so that an IM sent to a person not present may be shot-off as a text message (SMS) to the mobile of the person. Thus IM fits in well as part of a larger communication strategy across organisations. It has also been said to help improve communications by breaking down formal barriers between management, and enabling easy access to customers. Also, IM chat-rooms can be set up to allow instant discussion of customer enquiries or other topics.

Bottom-up adoption

Adoption is happening bottom-up, much as it did with the internet and email, with individual take-up driving corporate-wide implementation. One of the key barriers to business-to-business, or wider business-to-consumer take-up of IM is the lack of interoperability between the different freeware IM tools, so that someone using MSN Messenger cannot talk with an AOL user. It is not uncommon for users participating in multiple business networks to have one or more IM clients on their desktops. Using an open-source IM tool such as Jabber may be one way around the problem (Jabber has been identified as the sixth most popular IM service in the UK).

Despite this, IM has “developed into a serious business application within the financial community which is now used alongside the phone and email for front-office communications,” says Kevin Withnall, director at Vanson Bourne Research.

As most IM tools are external applications available over the public infrastructure (that is, the internet) they are difficult to manage. As a result, IT managers increasingly have concerns with regard to the security of IM.

“Because these public IM tools use a peer-to-peer connection between two users over the internet, they compromise security as, unlike enterprise IM tools, they do not pass any network servers,” says Mr Baker. As such, IM offers a way of bypassing such security measures as virus protection. While viruses cannot be transmitted in simple IM conversations, they can be carried in files attached to instant messages. “IM offers a way of getting around email rules and restrictions,” adds Mr Baker.

Apart from the security aspect, there are fears about the inability to screen and check data passed during IM conversations. Unlike emails, the transient nature of public IM conversations means that unless saved by users, there are no automatic records kept of conversations and therefore, audit trails are not always possible.

While Vanson Bourne Research in the UK shows that 60% of institutions say that traders and brokers are the main users of IM, there is little in the way of corporate policy on the management and use of IM. While storing and monitoring of emails is now corporate policy for most institutions, regulatory pressure has not yet extended to public/consumer IM conversations that happen on free, public networks

As long as business is being conducted over these platforms, companies have a regulatory responsibility to store, archive, and audit these communications. Mr Kovelsky notes: “To date, most commercial IM platforms do not allow firms, or individuals, to do this. This makes IM unlike email and other electronic communications, the data from which firms have been capturing and storing for over a decade.”

Unregulated risks

Given the fast-growing use of IM, the implication is that capital markets firms could be putting themselves and investors at risk by allowing workers to use unregulated IM networks to exchange business and financial information.

“Headline financial transactions are being done effectively ‘in the wild’ – in the same breath as comments on Big Brother or the latest Chelsea signing and with tools that are free on the internet,” said FaceTime’s Mr Baker. “Unregulated conversations are harmless fun for your average consumer, but not in a high-profile, high-value industry with strict corporate governance standards.”

Companies can no longer afford to ignore use of public IM, as usage is expected to rival that of email. Roughly 80% of investment bankers surveyed in the UK believe that IM will replace the use of email in some cases.

The Vanson Bourne research shows that policies on managing and tracking IM communications have not been implemented in the same way as they have for email or other forms of interaction. Only 36% of firms have a company policy to restrict IM, 27% tolerate it and 18% encourage it. One in five companies do not have a policy on the use of public-domain consumer IM tools.

A restricted approach

As a result of the potential risk to their business, many are taking, at best, a tolerant or restrictive approach to IM, rather than embracing the power of open collaboration and communication.

Companies need to ensure that IM is not being used as a conduit to break other policy regulations. However, regulatory controls on the use of public IM are mostly unknown, although, in the US, financial institutions are required by law to audit and track all electronic messages, explicitly including IM.

Bodies such as the Securities and Exchange Commission (SEC), National Association of Securities Dealers (NASD), and legislation such as the Sarbanes-Oxley Act (SOA) are all increasing the regulatory burden on financial institutions. The UK’s Financial Services Authority has been less prescriptive.

Overcoming the problems

The good news is that lack of interoperability, management control and security concerns can all be tackled, enabling organisations to offer use of IM without compromise. FaceTime Communications offers a suite of solutions to address the challenge of security, access control, and communications compliance data. Wachovia Securities, for example, implemented FaceTime’s IM Auditor Enterprise Solution to help solve its data and security issues.

Wachovia was facing the challenge of adhering to government regulations by recording all correspondence between employees and clients while at the same time empowering their customers with the use of IM. “Every time someone on our trading desk completed an IM session with a customer, they had to print out the IM log,” recalls Tony D’Agostino. “At the end of the day, supervisors sorted through stacks of these printouts.”

Wachovia decided to implement IM Auditor Enterprise Solution as it is IM network-independent and it was well integrated with Assentor, the email monitoring solution. Using Assentor’s email monitoring solution, Wachovia Securities captures and scans every email communication for key words or phrases that can have compliance or regulatory issues. IM Auditor Enterprise extends the same capability to public IM network communications.

Other features within IM Auditor Enterprise include IM compliance supervision, IM export capabilities, IM access control, IM identity management – all of which are essential to manage users’ screen identities and to ensure consistency with corporate credentials.

Technological advantage

According to Mr Kovelsky, the use of IM will penetrate very swiftly, as all it takes is for one or two major firms to request that their counterparts and clients use IM. Take-up would put a company and all its clients and counterparts online, giving the firm a technological advantage in the marketplace. And since IM is quick, easy and inexpensive to install and use, other firms may quickly follow suit.

“It will then be a short time before IM is as pervasive as email,” he says.

The challenge for financial institutions now is to ensure that they adhere to government regulations by recording all correspondence between employees and clients while at the same empowering their customers with use of IM.

“Simply banning IM usage is not the answer,” added Glyn Baker. “IM is a great personal productivity tool that has some clear business advantages. It’s better to let people use this technology to do their jobs but have the right controls in place just like we do for email and telephone calls.”

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