Sun Microsystems and AOL Time Warner are quietly working on advanced instant messaging software for corporate customers, a market segment dominated by Microsoft and IBM. The software, which is being developed within the companies' iPlanet partnership, is called Project RAC (Real-time Asynchronous Communications), or iPlanet Instant Messenger beta 3.0 . John Fanelli, director of marketing for iPlanet's communications products, insists it's just a research project at this stage, but several signs point to its eventual emergence as a commercial product to compete with similar offerings from Microsoft and others. IBM and Microsoft already have instant messaging software for corporate customers. A product aimed at business buyers would allow iPlanet to capitalise on AOL's top position in the instant messaging market today. And in demonstrating the RAC software during a "sneak peek" at the JavaOne show in June, Fanelli said iPlanet customers were interested. The new product fits neatly into iPlanet's portfolio of software products that handle tasks such as shuttling e-mail, delivering Web pages, managing employee calendars, and creating corporate portal sites. But competing technologies -- IBM's Lotus server software and Microsoft's Exchange -- have similar features and already can serve as hubs for private instant messaging groups. Much of the competition, though, is with free mainstream instant messaging software such as AOL Instant Messenger (AIM), Yahoo Messenger and Microsoft's MSN Messenger. One key element of success or failure will be how well the iPlanet software is able to connect to the millions who already use AOL instant messaging services, said Gartner analyst Joyce Graff. Fanelli said the Project RAC software "was clearly designed to enable openness with other services," but several sources said they don't expect the first version of the software to be able to connect to AOL services. "In a first release, they could get away without a connection," Graff said. But with an AOL connection, iPlanet "has the potential to come up with a world-beating instant messaging product. If they don't, they'll embarrass themselves." IBM's Lotus Sametime can connect to AIM, but Microsoft's MSN Messenger can't. Microsoft and AOL have been battling to make their respective products the standard for messaging, and the iPlanet project could become an important weapon. Microsoft said last month that the new version of its operating system, Windows XP, will significantly boost the abilities of its instant-messaging software to provide text, chat, video, audio and telephony services. Dubbed Windows Messenger, the software is considered a direct assault on AOL's dominance in instant messaging. A new product line -- especially one that could tap into AOL's instant messaging strength -- also could help shore up iPlanet's middling success. The venture has a paltry 9 percent of one key corporate software market, application servers, and 6 percent for the software that dishes up Web pages. AOL and Sun set up iPlanet after AOL acquired Netscape Communications, but the company is increasingly becoming a Sun operation. By last October, only 800 of iPlanet's 2,500 employees were from AOL, Sun chief executive Scott McNealy has said. And Sun chief financial officer Mike Lehman said Sun owned all of iPlanet's intellectual property. AOL did not return calls for comment. Another hurdle for iPlanet will be gaining widespread presence on desktop computers, an area where AOL has been successful but Sun has flopped. Java software didn't become the threat to Windows that Sun hoped it would be, and its Star Portal software didn't dent Microsoft Office's popularity. But corporations still are lukewarm to the concept because they're worried about outsiders monitoring conversations or even seeing who's chatting with whom, Graff said. iPlanet's corporate focus could help win a good part of the instant messaging server market, though. "Unless they did something stupid, I think it will be...a very important player in the market," Graff said. In addition, numerous other companies -- among them Jabber, Mercury Prime, QuickSilver, 2Way, Ikimbo, Ezenia, ACD Systems and Bantu -- are developing corporate instant messaging software. IPlanet licensed its instant messaging software from SoftBase Systems , said Burton Group analyst Jim Kobielus. Fanelli declined to comment on the issue, but the iPlanet software feature list is nearly identical to that of Softbase's NetLert program. And in both cases the software that people run for instant messaging is written in Sun's Java language, a feature that makes the software easier to run on different kinds of computers, such as Windows, Linux, Unix and Apple systems. Among features of iPlanet's Project RAC -- and often NetLert as well: * The ability to broadcast messages such as news to groups of people who subscribe to a particular channel. * The ability to poll groups of users on a question and compile the responses. * The ability to forward messages to cell phones when a person's computer is offline. * Integration with Lightweight Directory Access Protocol (LDAP) lists of employees, which can include contact information, job descriptions, and so on. * Chat rooms. However, the software doesn't have a few features already found in some instant messaging programs. There's no ability to chat by voice, for instance, or to send files or set up videoconferences. And Microsoft argues that its upgraded Windows Messaging software, set to debut Oct. 25 as part of its Windows XP operating system, will enable sophisticated collaboration, said Tom Laemmel, a product manager for Windows XP. With Windows Messenger, a person will be able to invite a second person to operate software on the first person's computer -- adding text to a Word document or troubleshooting a problem, for example. Microsoft also is experimenting with instant messaging services such as "bots" that will retrieve stock quotes when a person types in a stock ticker, or video feeds from TV stations when a person types in its call letters, Laemmel said. And While iPlanet could tap into AOL's vast instant messaging audience, Microsoft has a strong following with MSN Messenger and an unbeatable software distribution channel through Windows. Windows Messenger is aimed about half and half at consumers and more serious corporations, Laemmel said. While consumers will be able to sign up and find buddies through Microsoft's Passport service, corporations will be able to set up closed instant message groups that rely on a corporate server, he said. For complete business coverage, see ZDNet UK's Enterprise Channel. Have your say instantly, and see what others have said. Click on the TalkBack button and go to the ZDNet news forum. Let the editors know what you think in the Mailroom. And read other letters.