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Tech startup of the month.

INITIAL LIGHTBULB: Instant messaging--real-time, chat-style communication over the Internet--started catching on with Generations X and Y in the late 1990s, when the primary software options were incompatible clients from AOL, Microsoft and Yahoo.

To free the code from these corporate clutches, software engineer Jeremie Miller launched an open-source movement called Jabber (not unlike that of the Linux operating system or the Sendmail e-mail platform) from Cascade, Iowa in 1998. Then in his early twenties, Miller catalyzed a community that developed a free, XML-based alternative to the big boys' software. The open-source Jabber is now installed on more than 150,000 servers worldwide.

In mid-1999, Perry Evans, then CEO of Denver-based Webb Interactive Services, Inc. and co-founder of MapQuest, took note of Miller's work and arranged a meeting. Evans saw potential for a commercial version of Miller's protocol, and Jabber Inc. officially incorporated as a Webb subsidiary in 2000. While he's not on staff, Miller continues to guide the Jabber open-source movement from his home base in Iowa, with a stipend from Jabber the company.

IN A NUTSHELL: Corporate America has recently realized what teenagers have known for the past half-decade, said Rob Balgley, Jabber's president and CEO. "The value of instant messaging is its ability to offer presence and availability," he said. "That's what's made it so wildly popular." In comparison with e-mail, which tends to get lost in an overloaded inbox, an instant message is immediate and the communication tends to resolve itself on the spot. "It's much more suitable to the way we actually talk," Balgley said.

Many companies are finding that employees are already using one of the consumer instant messaging tools at work, which Balgley labeled as problematic. "It's not productive, it's not in line with corporate culture, and it's not supported by an IT staff," he said. Jabber eliminates this problem, with "customizable, extensible and scalable" enterprise instant messaging products that run behind a firewall.

Because the software is easy to customize, Jabber's customers "can take the essence of instant messaging ... and extend it to other systems, like a customer relationship management application or a supply chain application or a knowledge management engine," Balgley explained. "By doing that, you're giving those other applications a dynamic quality." For example, a worker at a call center can carry on several instant message-based conversations at once, rather than the status quo of one phone call at a time.

Jabber's pricing begins at $30 per seat with a discount for volume, which Balgley termed as being on the low end of the going rate for enterprise instant messaging.

With 50 employees, Jabber is on the cusp of shedding the startup label. "Critical mass for a software company is usually about $5 million or $6 million" in annual sales, Balgley said. "I think that's where companies grow out of their startup, grow out of adolescence and start maturing into a more significant entity. We're just on the threshold of that; our annual sales are about $3.5 million."

THE MARKET: Analysts have estimated that the enterprise market for instant messaging technology will be between $2 billion and $3 billion by 2005, Balgley said.

Jabber is already the No. 2 player in the enterprise instant messaging market, after IBM. Among Jabber's enterprise clients are Sony, Hewlett-Packard, the City of Denver and Federal Express; carriers that have licensed the technology to provide to their ISP customers include BellSouth, AT & T and France Telecom.

But the IT spending crunch has been a hindrance to the company's growth. "Most of the people who bought from us bought only about 20 percent of what they needed simply because they were so constrained when it came to their IT budget," Balgley said. The 175,000-employee Hewlett-Packard, for example, rolled out with 15,000 users last year, and is now in the process of expanding to 60,000 users.

FINANCING: The primary investors in Jabber are Webb Interactive Services, which holds a 70 percent stake in the company, and France Telecom, with a 20 percent share. However, Jabber is on the cusp of closing an investment with another large company that will significantly change the makeup of Jabber's ownership.




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Title Annotation:hightech coloradobiz
Author:Peterson, Eric
Geographic Code:1USA
Date:May 1, 2003
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