The developing electronic messaging market in the United States: Market overview and analysis of key competitors

Telematics and lnformatics, Vol. 11, No. 1, pp. 61-76, 1994 Copyright @ 1994 Elsevier Science Ltd Printed in the USA. All rights reserved 0736-5853/94 $6.00 + .00

Pergamon

0736-5853(94)E0003-B

THE DEVELOPING ELECTRONIC MESSAGING MARKET IN THE UNITED STATES: MARKET OVERVIEW AND ANALYSIS OF KEY COMPETITORS

Michael Dowling Sanjay Singh Abstract-This article provides a brief overview of a new market for electronic messaging that is developing from the merging of the markets for electronic mail (E-mail) and electronic data interchange (EDI) in the United States. This merging is, in part, being driven by standards such as X.400 and X.435 which provide a basis for sending documents both free form, as is common with E-mail, and more structured, such as a purchase order sent for EDI purposes. In addition, we profile four key competitors, AT&T, MCI, IBM, and BT, which are all involved in both of these markets. These profiles are based on interviews conducted with product managers at the four firms and reviews of published articles and reports on these companies.

INTRODUCTION Two of the most popular uses of computer-based information services are electronic mail (E-mail) and electronic data interchange (EDI). While E-mail is primarily used for person-person communication, E D I is used for inter-organizational transactions. Despite these differences in focus, the core technology for both of these services are the same. While the worldwide growth o f these services has been phenomenal, two factors have hindered more widespread use (Radosevich, 1993). First, different standards in Europe and the United States have emerged for both E-mail and EDI. Second, problems in interconnection between providers of these services have made integration, and hence, wide-spread use, more difficult. However, with the increasing globalization of the world economy, there has been a growing trend by service providers to unify the competing standards and provide seamless "electronic messaging" for customers. The purpose of this article is to provide a brief overview of this new market for electronic messaging that is developing f r o m the merging of the markets for electronic mail (E-mail) and electronic data interchange (EDI) in the United States. This merging is in part being driven by standards such as X.400 and X.435 which provide a basis for

Michael Dowling, P h . D . is in the Department of M a n a g e m e n t in the Terry College of Business, University of Georgia, Athens, GA 30602. Sanjay Singh, Ph.D. is in the Department of M a n a g e m e n t at the University of A l a b a m a at Birmingham, Birmingham, AL 35294-4460

61

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Michael Dowling and Sanjay Singh

U.S. E-mail Installed Base No. of Mailboxes (10OOs)

Public vs. Private 1989-92

26000 2400O 22000 200O0

jJ

18000 16000 J

14000 12000 10000 8OO0 6OOO Public

4OO0

2OO00 - -

,

1989

1990

1991

1992

Year Figure 1. Private E-mail systems have grown faster than public systems. Reprinted with permission from Arnum, E. (1993, July). E-mail choices and format abound. Business Communications Review, p. 31.

sending documents both free form, as is common with E-mail, and more structured, such as a purchase order sent for EDI purposes. In addition, we profile four key competitors involved in both of these markets, based on interviews conducted with product managers at the four firms and reviews of published articles and reports on these companies. MARKET OVERVIEW

Electronic mail services In 1992, there were over 26 million E-mail users in the U.S. (Arnum, 1993b). This market is expected to grow rapidly so that by the year 2000, it will consist of 40 million users sending 60 billion messages per year (Communication News, 1991). E-mail revenues are also expected to grow 30°7o annually through the 1990s (Rothfeder, 1989). This increase in usage is being driven by efforts to connect users within companies and then users between companies. The primary hindrance to growth is specification of standards to make it possible to transfer messages between systems. Currently, it is difficult to use E-mail services for electronic data interchange (EDI) and vice-versa. However, the adoption of the international X.400 is proving to be a standard solution for both E-mail and EDI. Other key technologies for the further development of E-mail services are ISDN and other high speed data switching technologies. The market for private E-mail is larger and growing faster than public E-mail services as shown in Figure 1. The fastest growing segment of private E-mail is the market

Electronic messaging market in the United States

63

Types of E-mail Boxes Installed Type

1989-92

No. of Mailboxes (lO00s) 14000-

/

~-

LAN

\

--

Host (e.g. Interact)

Private

13000 -

/ /

/

.

Consumer

/-

~

Business

/

/

11000-

/

Public

/ /

10000

// J

9000J

8OOO 7000

t

~

/j-"

/

//

6OOO /

50OO 4OOO

/

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3OO0

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1000 0

1989

1990

1991

1992

Year Figure 2. Public E-mail systems, especially LAN-based will grow faster than private systems. Reprinted with permission from Arnum, E. (1993, July). E-mail choice and format abound. Business Communications Review, p. 31.

for Local Area Network (LAN) services as shown in Figure 2. There are over 600,000 LANs in the U.S. but only 10°70 with E-mail systems. This market represents over 8.5 million L A N E-mail users in the U.S. and is projected to grow to 50 million by 1995 (International Data Corporation, 1992). Observers feel that the ability to use public services to connect L A N users within and between organizations will become a driving force for public E-mail services growth. In particular, high growth in demand for E-mail services is expected to come from large corporations. For example, f r o m a recent survey by IDC, Fortune 100 (the largest industrial firms in the U.S.) showed the following usage patterns (Computer World, 1992): 1. 98°70 use E-mail in 1992, up from 67°7o in 1991 2 . 6 5 % use LAN-based E-mail 3. 65% can access a universal mailbox from anywhere 4. 58°70 can integrate graphics/images in E-mail 5. 58% can be notified in E-mail of fax receipt 6. 62% can retrieve messages in any format from E-mail 7. 54°70 can be notified in E-mail of voice mail receipt 8. 54% can integrate fax graphics in E-mail The development of E-mail directories will also be a driving force in the market. The North American Directory F o r u m is currently working on a directory based on the X.500 standard for an on-line directory of E-mail users (Higgins, 1991). Such a directory will function as an electronic phone book where the E-mail addresses will be supplied by typing the name of the recipient. A directory should also improve the

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Michael Dowling and Sanjay Singh

connections between public and private E-mail users, but it may be as long as 10 years before directory services are available. Members of this forum include ATT, MCI, IBM, Bell Atlantic, US West, GE, BT North America, Pacific Bell, and the US Postal Service. The main hindrance to growth is specification of standards to make it possible to transfer messages between systems. Currently, it is difficult to use E-mail services for electronic data interchange (EDI) and vice-versa. However, the adoption of the international X.400 is proving to be a standard for both E-mail and EDI. Other key technologies for the further development of E-mail services are ISDN and other high-speed data switching technologies. E-mail is also no longer just for text. Wireless messaging units, called personal communicators, such as Apple Computer's Newton device, include E-mail, cellular phones, and fax machines. Another factor in the growth of E-mail is the current popularity of the Internet, a collection of networks that connects about 6 million users worldwide (Arnum, 1993b). The Internet originated as a research network designed by the Pentagon in the 1970s, and grew slowly in its early years, heavily subsidized by the government. However, recent improvements in the network have encouraged private E-mail companies to begin connecting to the Internet, and it is now becoming attractive as a commercial messaging service. Even President Clinton and the White House have gone on-line (his Internet address is: [email protected]). Prices for public service E-mail currently range from 50 cents to $1 per message, plus registration fees for mailboxes. A sample of prices is given in Table 1. The market shares of the major competitors in the E-mail market are shown in Figure 3. EDI services

The EDI market has also grown rapidly as shown in Figure 4. Approximately 42% of Fortune 100 companies currently use EDI, and the growth rate for ED! in the 1990s is

expected to be 20-30% annually. Total industry revenues for 1992 were approximately $300 million. However, that is about the amount that Americans spend on fax telephone calls every two weeks (Arnum, 1993a). Exchange of financial transaction documents (e.g., remittance forms, billings, etc.) is the largest market for EDI applications. The reported cost savings from implementing EDI systems are eight times the investment costs. The average cost of sending and receiving electronic purchase orders and invoices cost is about $1-2 each (Arnum, 1990). A sample of EDI prices is given in Table 2, Competition in the EDI market is Table 1. Comparison of E-mail charges. Supplier

AT&T MAIL

MCI MAIL

BT DIALCOM MAIL

IBM MAIL

Mailbox fee per month

$28.00

$35.00

$25.00 (with a $6.50-19.00 per hour connection fee) $29.00

Fee per character 0-1000 characters 1001-2000 characters 2001-3000 characters each additional 1000 0-500 characters 501-1000 characters over 1000 1000 character segment

$.50

4000character segment

$.501segment

$.80 $.95 $.05 $.50 $.60 $. 1011000 characters $.50/segment

Electronic messaging market in the United States

65

Public E-mail Providers Market Shares 1 9 9 2

ATR.T Mail (33%) GE Info Sentk::es (22'

Other (3%) America On-line (2%)

tBM (3%) x r ~ (4%)

Sprint (12%)

serve (6%) u i W~) Figure 3, AT&T is the market share leader in E-mail volume• Reprinted with permission from Electronic Mail and Micro Systems Newsletter, Washington D .C., (800) 822-6388.

Market for EDI Services 1987-93

Number of Companies 40000 35OOO 3OOOO

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1989

T

19'90

1991

1992

19'93

Year Figure 4. The market for EDI services is also growing rapidly. Reprinted with permission from Arnum, E (1993, February). New specs, broader boundaries for EDI. Business Communications Review, p. 41•

Michael Dowling and Sanjay Singh

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Table 2. Comparison of EDI charges. ATT EDI--$.20 per address plus 1-3000 characters 3001-10,000 characters 10,000 + characters Installation Fee $50-150.00 Annual Fee $150.00 IBM-EDI on IBM Information Exchange Message charge Per 1000 character segment Dial access charge per segment BT EDI* Net Per 1000 character segment Mailbox fee: Asynchronous --$ 25.00 month Bisynchronous--$100.00 month Monthly minimum: $100.00 Installation: No cost

$.000151character $.00010/character $.000051character Prime Time $.37 .089 .034 Peak Hours $.30

Non-Prime Time $.18 .044 .017 Non-Peak Hours $.20

being led by GE Information Systems (GEIS) and Sterling Software. Both companies had an estimated $50 million in revenues in 1992 (Arnum, 1993a). Recently, GEIS announced plans to team up with Ameritech, one of the Regional Bell Operating Companies, in a new joint venture for data service including E-mail and EDI (Keller, 1993). One major problem in the further development of EDI is standards. Currently, there are a variety of standards being used. For example, the American National Standards Institutes's (ANSI) 811 Consolidated Service Invoice/Statement is the invoice of choice for telecommunications billing in the U.S., but ANSI 820 is the remittance advice standard using the Corporate Trade Exchange (CTX) format. ANSI X. 12 is used by 10,000 U.S. firms and EDIFACT is used by over 1,000 European firms. The problems of standards is also slowing the international growth of EDI. To overcome such shortcomings, Infonet, an American company, has entered into a partnership with a number of national post, telephone, and telegraph (PTT) administrations in other countries. Under the agreement, ten PTTs own 70°70 of Infonet's stock. The rest is owned by Computer Sciences. Infonet provides EDI software on an OEM basis to all of the global EDI participants. This software provides end users with transparent EDI translation services within the framework of a consistent user interface. A second major problem in the growth of EDI has been the fax machine. For many simple applications, e.g., sending simple orders or invoices, fax machines have become the technology of choice because they are versatile, easy to use, and relatively inexpensive. A one page document can be sent for about $0.20 versus $2 for an EDI transaction (Arnum, 1993a). Domestically, there are other barriers to the penetration of EDI in the business marketplace such as: • • • • •

a lack of companies with which to communicate via EDI; the real and imaginary costs of EDI; false perceptions, such as EDI is only for "big companies;" waiting for trading partners to implement EDI first; internal resistance from employees (Langer, 1990).

Electronic messaging market in the United States

67

These barriers have slowed the growth of EDI to only half the rate forecasted a few years ago. For example, in 1987, the EDI market was forecasted to have grown to $1 °4 billion by 1993 where actual revenues were approximately $500 million. According to a recent story in the Wall Street Journal, there still remains a lot of inertia among companies who fear that they will have to radically change their business practices if they adopt EDI (Keller, 1993).

The role of standards in the merging of E-mail and EDI The greatest impediment in the growth of an electronic messaging market is the problem of standards. Incompatible standards, particularly in the electronic data interchange (EDI) arena, have developed on a regional basis or by industry. Recent developments from international standard bodies like Consultative Committee on International Telephone and Telegraph (CCITT), and International Standards Organization (ISO), however, promise to provide a unified standard for all types of messaging, particularly E-mail and EDI. The following is a description of the existing standards and how a new standard will further the development of a messaging market. X. 4 O0 CCITT and ISO recommended this standard for E-mail in 1984. Since then, the de facto standard for message handling systems (MHS) has become X.400 (Scott, 1991). The highlights of the recommendation were: • a standard addressing scheme called originator recipient (O/R); • a standard set of protocols governing the flow of data (e.g., P-0 for unstructured ,data, P-I for standardized E-mail messages); • definition of boundaries for MHS such as private management domains (PRMD) :For intra-company E-mail systems, and administrative management domain (ADMD) for inter-company E-mail systems, i.e., between PRMDs; • definition of user agent (UA), i.e., the interface between the user and MHS; • definition for message transfer agent (MTA), i.e., system agents that perform store/forward message transfer functions.

X. 12 and EDIFACT Standards and protocols for EDI have evolved separately in different industries and regions (Snapp, 1990). For example, the first standard came from Electronic Data Interchange-Association (EDI-A). This standard was designed specifically for the transport industry, which later on served as the platform for standards in other industries, e.g., uniform communication standards (UCS) for the grocery industry. The most prominent standard in the North American market is X.12 which was written by the American National Standards Institute (ANSI). It is based on the EDI-A standard but is more flexible in handling the requirements of multiple industries. Europe, on the other hand, has adapted EDIFACT, a standard sanctioned by United Nations (UN). This standard emerged from the UN's committee for EDI in Administration, Commerce, and Transport. However, in November 1992, the ANSI voted unanimously to switch to the EDIFACT standard by 1997, thereby forcing thousands of use,rs to adopt new systems.

Michael Dowling and Sanjay Singh

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X.435: A new standard for EDI and E-mail. The X.435 standard for EDI messaging systems and services is an important development in the future growth of the electronic messaging market. It governs the transmission of EDI documents over X.400 E-mail systems. In essence, X.435 specifies how EDI documents can be encapsulated as X.400 messages and transmitted directly between trading partners or through the X.400 services of a value added network (VAN). Since E-mail systems are increasingly based on the X.400 protocol, it is expected that the use of EDI through X.400 E-mail will increase significantly. X.400 is more suitable for transmitting EDI documents than the existing X.25 protocol. The reason being that X.400 is an application level protocol, and hence has more features than the X.25 protocol which is a transport level protocol. Example of features are extra security, enhanced administration, and the ability to send copies of a single document to multiple recipients. All of these significantly reduce the cost of transmitting EDI documents. Again, since EDI documents are not transmitted in real time, it is better suited for the store and forward feature of the X.400 system. Instead of using the P-0 and P-1 protocols, X.435 uses the P-EDI protocol to handle exchange of data between different E-mail systems. P-EDI preserves the EDI message rather than converting them to ASCII text format. In addition, X.435 allows the exchange of non-text messages like graphics. The true benefit of X.435 is evident in exchange of documents between X.12 and E D I F A C T based systems. As long as there is a X.400 connection, a document based on either X. 12 or E D I F A C T standard, can be encapsulated as X.400 E-mail message, transported within or between companies, and translated back into the EDI standard of the recipient. This process is greatly facilitated by translation software that exists on the market (e.g., EDI Expediter from IBM). Companies like Boeing and Westinghouse are extensively using the X.400 services offered by AT&T, US Sprint, and IBM for currying EDI documents.

COMPANY REPORTS In order to gain further insights into the dynamics of a developing electronic messaging market in the U.S. we conducted interviews and collected publicly available information on the services of four major competitors: AT&T's EasyLink Services, MCI Mail, IBM's Mail Exchange, and BT Tymnet. These companies represent major competitors pursuing a range of different strategies. AT&T AT&T which had developed a small E-mail services unit in the 1980s, became the largest public E-mail provider with its $180 million acquisition of Western Union's Easylink service in 1991. Services. AT&T offers a range of services to over 160 countries including: • AT&T Mail and AT&T Easylink electronic m a i l - t w o global messaging systems that are now being integrated, • AT&T Enhanced F A X - - a secure store and forward fax service with broadcast and mailbox capabilities, • AT&T E D I - - a X.400 based service for simple business documents, • AT&T T e l e x - a low speed messaging service, • Information services-access to on-line databases.

Electronic messaging market in the United States

69

A T T Mail has a flexible architecture that supports all of its services. It has interconnections with Dialcom, Telemail, MCI Mail, and seven foreign carriers. AT&T views the market for E-mail and EDI as really a larger messaging market since the distinction between E-mail and EDI is fading. E-mail is taking on more of the characteristics of EDI as messages become less free form. Future services that AT&T plans to offer include: * • • • •

Support o f multimedia transmission Cut and paste bulletin boards of directory information in the document Access to image databases Alternate addressing Message status reports Media conversion to EDI

Although AT&T serves more than 160 countries, it has service and operation centers in only 20 countries. But this base will be expanded aggressively in the future. AT&Ts EDI service allows business customers to exchange documents and E-mail messages between a customer premise system and the A T T Global Messaging Network in a single session. AT&T's EDI services have the following components: a value added network; a complete suite of EDI software products from leading EDI vendors; integrated interface software to ensure message and session compatibility; a comprehensive line of computer and communications hardware for EDI; and a complete set of optional customer services. Nevertheless, AT&T service provides less complicated forms of EDI than offered by some competitors, and some analysts have even referred to it as a "poor man's" EDI. However, the market for such simple EDI services may be quite large.

Marketing. AT&T

markets its services with a direct sales force to the Fortune 500 (the largest 500 industrial companies) in the U.S0 The direct sales force works closely with AT&T's business network specialists. It also has cooperative marketing agreements with, for example, Microage software and an agreement with ABA-Net, a network established for lawyers by the American Bar Association. Its marketing strategy is based on developing applications for large business, but it is also working on plans for expanding into small- and medium-sized business. The industries it has focused on include; petrochemical, travel, banking, and insurance.

Factors affecting growth of the market. AT&T believes that the key to growth in the market (which it now estimates at 18-25°70 per year) as an ability to connect Local Area Networks (LANs) to other LANs over the public network. In this regard, AT&T forged a new alliance with software giant Microsoft in the summer of 1992. AT&T will work with Microsoft to provide its services to connect users of MS-Mail, a LANbased E-mail system with over 1.5 million users. It is pursuing similar agreements with other LAN E-mail providers. In addition to its key alliance with Microsoft, it is also pursuing opportunities in wireless messaging. In October o f 1991, it announced a venture with Skytel Corporation (a paging company) to provide wireless messaging to AT&T Safari Notebook computers. The Skytel pager notifies users that they have incoming E-mail which can then be connected to the Safari notebook computer for viewing. Software costs are $450 and monthly fees are $48. This venture is targeted towards the 120,000 SkyTel

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Michael Dowling and Sanjay Singh

customers and 350,000 Easylink customers. AT&T estimates that 60°70 of its subscribers carry laptops. In June of 1992, it announced an agreement with RAM Mobile Data, a leader in the wireless data communications market, to develop packet radio technology. AT&T sees such alliances as a key to its strategy. New E-mail applications will also influence the development of the market. AT&T feels that as U.S. companies adopt the Japanese model of closer cooperation with suppliers and buyers they will use EDI and E-mail more frequently. As an example, AT&T is working with a major airline reservation system to provide order confirmations back to travel agents or customers. The confirmation will be sent either by E-mail, fax, or regular mail depending on the request of the customer. In this way, the growth of fax machines should actually help the growth of demand for its services.

View of competition. AT&T sees other E-mail and EDI providers as its competitors, but especially those with the same broad array of services. MCI, a traditional competitor in long distance, does compete with E-mail but not with the same variety of services and delivery options. In Europe, it is a stronger EDI competitor through its subsidiary ISTEL. It is expanding overseas by establishing network nodes. Key success factors. The key success factors for competing are connectivity, especially LAN to LAN, reliability, and the ability to understand how messaging technology can improve a customer's business. Knowledge about technology and the business must be blended to form economical solutions for the customer, This is why AT&T feels a dedicated sales force is necessary to successfully sell these products. MCI Mail MCI Mail was created in 1983. Bill McGowan, founder of MCI had a vision to replace the U.S. Postal Service with an electronic mail service with locations around the country to send and receive messages. However, the market grew slowly due to the low penetration of personal computers (PCs). Later in 1983, MCI acquired Western Union International, a telex service. It used this acquisition to build its E-mail service by providing a telex interface allowing users to send from PCs to telex machines. The telex market is now slowly dying out.

Services. The MCI Mail system provides several interesting services including standard E-mail and fax services. This service allows faxes to be sent simultaneously to as few as one and up to 1000 addresses with the actual letterhead and signature of the sender, which it can store in an optical storage device. MCI Mail can connect to any kind of computer or Local Area Network (LAN). Most users are connected via LAN's, so they don't actually dial up MCI, but transmit through a gateway connected to their LAN. MCI's system is based primarily on hardware and software supplied by Digital Equipment Corp. Customers are using its service to perform EDI but MCI Mail is primarily the transport vehicle. MCI Mail users can exchange messages with users on various public and private messaging systems that are interconnected with MCI using the X.400 protocol. MCI's X.400 connections allow users to send and receive messages with such services as AT&T Mail, Sprint Mail, GEIS Quickcomm service, DBP TELEKOM's Telebox in Germany, and the Atlas 400 services operated by Transpac in F r a n c e - t o name just a few. A single MCI Mail mailbox currently has access to users on 35 public messaging

Electronic messaging market in the United States

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systems in 36 countries, millions o f fax machines worldwide, and 1.6 million telex terminals.

Marketing. Today, M C I has over 125,000 mailboxes which represent over 750,000 users, not counting the 28,000 employees o f M C I that use the service internally. Its marketing force targets large corporate clients, especially those using M C I long distance services. It has concentrated on the banking, i m p o r t - e x p o r t , shipping, and petroleum industries based on its old telex business. It is difficult to know how m a n y users M C I Mail actually services since m a n y of its large customers have internal LAN-based E-mail systems that connect to MCI. For example, Chase M a n h a t t a n Bank has an X.400 connection to M C I Mail, but behind that connection it has over 80,000 users on an internal E-Mail system. M C I currently distributes the product in 30 countries and has customers in more than 80 countries. It looks for foreign partners to sell its services, usually as part of other L A N based software.

Factors affecting growth of the market. M C I sees several technology changes that will impact the growth of the business. First, customers want higher-speed access. Most access now at 2400 baud but are moving to 9600 baud and higher speed modems. M C I is also working on the ability to receive incoming faxes into an M C I Mail box and to add voice messaging.

View of competition. M C I sees other m a j o r messaging companies as its competition, such as A T & T Mail, Sprint Mail, GEIS, and IBM I n f o r m a t i o n Network. However, clearly its main competitors are companies like A T & T and Sprint which are also offering E-mail as a value-added service over their telecommunication networks. C o m panies like GEIS and IBM are more focused on E D I with E-mail as an add-on service. Key success factors. M C I also appears to be targeting the L A N - t o - L A N connectivity market, making reliable connections very important. Traditionally, M C I has taken a low cost, low price approach to marketing its services, but with E-Mail it is attempting to price its service based on the value it provides to the customers. It did not mention any key alliances such as those announced by AT&T.

IBM information services IBM's E-mail and E D I services are provided through the I n f o r m a t i o n Services Division. It has been in the E D I business since 1982, but real value-added services have been in place since 1987. Its services are available in more than 91 countries. Differences in services depend on the local telecommunication infrastructure.

Services. The types o f services that IBM offers for IBM user to IBM user are: • • • •

Standard network architecture (SNA) Packet Switching (X.25) Application p r o g r a m m e r packet network (APPN) on SNA open architecture Use of IBM's internal network as a backbone, if customers have their own software capabilities • X.400 based E-mail and E D I applications

For N o n - I B M users computer communication between different systems can take place in any of the following modes:

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Michael Dowling and Sanjay Singh • Synchronous o Asynchronous • Bisynchronous

IBM's E-mail services were first offered nationally in 1987 and internationally in 1989. E-mail and simple EDI services based on the X.400 standard are offered over its existing X.25 network. Services based on the X.435 standard for free-formatted text will be offered soon. IBM is also working on d':ectory services based on the X.500 standard. It has already developed its own computerized directory consisting of white and yellow pages. The white pages are a list of companies linked to IBM's E-mail network. The yellow pages have detailed information on the same companies. IBM also recently entered into a venture with nine cellular carriers to develop one platform for transmitting messages over existing cellular voice channels. This platform has gained endorsement from major hardware and software vendors. Specific E-mail services include: • Store and forward mail-boxes • Post office type services, i.e., using IBM as a network provider • Transfer of EDI formatted data. IBM offers either complete end-to-end or customized (i.e., limited) services depending upon the needs of the customer. It sees its added value as providing the interface between two customers' systems. IBM's EDI business began in 1982, with its solution center established in 1985-86. Its service was the fifth largest in 1989 with $7 million in revenue. The company announced its Expedite Data Interchange software series that supports all its SNA systems in translating a variety of business documents into EDI formats like ANSI X, 12 and E D I F A C T . This software complements EDI services currently being offered by IBM Information Network, a value-added network service based in Tampa, Florida. The company already offers Expedite Communicator Series, which supports a variety of communication interfaces, including a direct link to IBM's Information Network via a remote job entry (RJE) link. It maintains many partnerships with other EDI software companies that help provide translation packages from its platform to other computer platforms such as DEC. Data interchange packages are updated thrice a year and are provided free of charge. It maintains separate EDI and E-mail customer service centers which provide complete services (from arranging meetings for client's to writing the software code).

Marketing. IBM's

main marketing advantage in EDI and E-mail is its large installed base and its marketing clout. The company uses its SNA architecture protocol environment as the backbone of its EDI services. However, this format is only usable for intra-IBM system transfer. If all goes well, it can establish a new client's EDI connection in as little as three hours. For additional fees IBM can also provide management consultants for EDI that help customers develop feasibility studies. If a customer simply wants to use IBM's "mailroom" facilities, then it can provide translation of the transaction and give the final file to the customer in the required format. For true IBM customers, there is only one connection for both EDI and E-mail services. This may not be true for other companies like AT&T where a customer might require two

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separate connections. IBM's EDI services have matured enough that E-mail services can be provided on top of EDI services. IBM is targeting specific industries to market EDI and E-mail service, namely, insurance, health care, retail, government, manufacturing, and distribution. It emphasizes large companies with smaller companies typically considered only as part of a larger customer's client interface requirements. However, it is currently weak in offering LAN-to-LAN office system products. IBM has entered into some joint marketing ventures such as: IVAN (insurance value added network), a network of independent agents and insurance companies, a network for the American Association of Motor Vehicle Agencies (AAMVA), and with Prudential Bache, a financial services firms. These large networks get big volume discounts. Overall, IBM's marketing efforts are increasingly shifting focus from being simply a hardware vendor to a provider of services and products. Its customer base is mostly comprised of existing IBM customers. It has separate marketing personnel dedicated to EDI and E-mail services. Both marketing staffs can get help from the solutions centers for either product. With all of the restructuring IBM has undergone recently, many jobs are now subcontracted out of the company (i.e., outsourced). However, information network services, such as EDI and E-mail services groups are kept inhouse and are expanding and growing.

View of competitors. In the EDI market, IBM sees GElS and the large retailer Sears as big competitors. However, it recently announced that it is forming a joint venture with Sears called Advantis to offer EDI services. Key success factors. A key factor for technological success is the harmonization of competing and incompatible standards. Other success factors include maintaining quality of service, establishing a critical mass of customers, and offering both national and international services. Security is also a very important concern for customers. BT Tymnet BT acquired Tymnet for $355 million from McDonald Douglas in 1984. Tymnet was one of the first value added networks (VANs) which developed its services on packet switching technology. It has been offering EDI services since 1978 and has offered E-mail as early as 1981. E-Mail is provided under two proprietary E-mail systems: Ontyme and Dialcom. Ontyme was the VAN system developed under Tymnet's packet switching services. Dialcom was a system originally licensed to BT for use in the U.K. and later acquired from ITT. It now provides new users with E-mail and other services based on the X.400 universal messaging platform, which are sold under the BT Messaging ;Services umbrella. Tymnet characterized the difference between E-mail and EDI as follows. E-mail is essentially for unstructured, free form data. EDI is for more structured data like purchase orders. It usually involves some kind of character code conversion and diagnostic software. E-mail usually involves only one address per mailbox but EDI may involve multiple addresses with address conversion. However, it also sees a developing generic "messaging market" particularly based on X.400 that will include E-mail and EDI.

Services. With EDI revenues in 1989 estimated at $15 million, BT Tymnet's E D I . N E T was the 3rd largest EDI provider, contributing 6% of its total VAN services of $245

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million. Access to EDI*NET is available through Global Network Services, BT's worldwide value-added data network service. BT offers EDI in cooperation with third party EDI software providers and does some consulting for EDI services set up. But when a customer needs complete help in setting up a system, it recommends system consulting firms. BT concentrates on three industry groups: 1) retail, particularly grocery stores for historical reasons; 2) manufacturing, 3) chemicals. In 1989, it processed 400 million transactions (5007o were electronic funds transfer). It also offers credit card validation, and funds transfer between a group of banks and has more than 100,000 customers on its network in the U.K. with connections to 23 other VAN's throughout the world. BT Tymnet has two proprietary E-mail offerings-BT's Dialcom service and Tymnet's OnTyme service. It plans to merge the two services, but currently they are separate due to different hardware platforms. BT's Telecom Gold service offers gateway access to a range of products enabling users to search business newspapers and magazines for information on particular topics. Its new BT Messaging Services based on the X.400 standard include switching capabilities, X.400 connections, BT mailboxes, and access to software. This service also provides access to on-line databases, travel information, and new services. It also has recently announced an alliance with Microsoft concerning LAN-to-LAN E-mail products. It has some internal directory services in place but are also working under the X.500 initiative for improved directory services.

Marketing. BT Tymnet markets its services through its historical connections as a VAN to major corporate customers and as part of BT's efforts to provide global telecommunications solutions to business customers. It does not have a dedicated sales forces for different products, instead its salespeople are trained to offer the variety of BT products for system solutions. In the EDI market, BT sees large multinational corporate customers as the most important since 35°7o of large U.S. corporations are using EDI, whereas only 8070 are using X.400 E-mail systems. Its key strength is access to these customers with leased lines to its network already in place. Also, its general networking capabilities and the ability to offer add-on services like E-mail are assets. It offers service in 26 countries and will be expanding soon to 35 additional countries, which is an "ambitious" expansion program. It has a joint marketing agreement with Legent Software. Factors affecting growth of the market. BT Tymnet expects the EDI market to continue to grow, with the rate depending on general economic growth in North America. The key technologies influencing growth are global standards like X.400 for E-mail and new global standards for EDI. The need for LAN to LAN communications will drive the market as will desire of large customers with older mainframe-based E-mail systems to upgrade and make its systems compatible with X.400 standards. View of competition. In the EDI market, BT Tymnet sees as its primary competitors companies like IBM and GEIS, which offer a broad array of services, and Ordernet, a subsidiary of Sterling Software, which specializes in large scale EDI only. Sprint, which earlier acquired Telenet, another VAN provider with a long history in the U.S., has specialized in E-mail and managed network services and has only recently begun

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to offer EDI, but is not a major player. In E-mail, BT sees AT&T as its primary competitor since it also has the ability to become a global player, which is clearly BT's goal.

Key success factors. The primary success factors mentioned were price, number of features, and the ability of a telecommunications provider to offer "one stop" solutions for the communications needs of its customers. BT's overall strategy is to develop its international presence in VANs with emphasis on data networking operations such as Tymnet. For BT, customer requirements can best be fulfilled through: * Provision of one stop shopping by providing international services to domestic customers in association with overseas telecommunication companies. • Establishment network capabilities outside the UK, e.g., Tymnet. • Creation of marketing, networking, and product alliances with overseas telecommunication companies and information processing companies. BT's efforts to position itself for future opportunities internationally will dominate its acquisition thrust over the next few years. Recently, it was reported in the Wall Street Journal, that BT is working on a billion dollar plan to build a global network offering multinational corporations voice, data, and video transmission services called "Project Cyclone" (Keller, 1992). It also recently purchased 20°70 of MCI creating a joint venture to offer managed network services especially to multinational corporations. Through these steps, BT hopes it will evolve into one of three "global supercarriers" by the year 2000. The development o f its E-mail and EDI systems would seem to fit into this overall corporate strategy quite well.

CONCLUSIONS In conclusion, the interviews we conducted, along with the other public information we collected, suggest that the market for EDI and E-mail services in the U.S. is beginning to blend into a general electronic messaging market. Competitors like IBM and BT Tymnet, traditionally quite strong in EDI markets, have added E-mail and other services to their value added networks as a way of increasing usage and providing "one stop shopping" for large corporate customers. On the other hand, long distance telecommunication services providers such as AT&T and MCI see E-mail as a way to increase usage o f their long distance networks and also provide additional value to their large corporate telecommunications customers. As the telephone and computer functions at large corporations are increasingly merged, and as the need for communication within and between organizations grows, these competitors see E-mail as a basic service to add to their marketing portfolios. The advent of the X.400 and X.435 standards, which also allow simple EDI transmission, provides the basis for E-mail providers to expand their service offerings into a larger "messaging market". Other technologies such as optical imaging also improve such services, as, for example, with the broadcast fax capabilities being heavily marketed by AT&T. The overall keys to success in this new messaging market will be the ability to understand how these new technologies can best be adapted to serve the needs of increasingly sophisticated customers with more complex communication needs.

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