AOL is humbled by e-mail directive

March 23, 2002

America Online is the world's most successful Internet service provider -- except, apparently, in its own house.

In a humbling reversal, AOL Time Warner Inc. is retreating from a top-level directive that required the divisions of the old Time Warner to convert to an e-mail system based on AOL software and run by America Online's giant public server computers in Virginia.

The drive to get all the company's 82,000 employees to use AOL e-mail was an attempt to give symbolic resonance to the marriage of AOL and Time Warner, the largest corporate merger in U.S. history and perhaps the most-scrutinized litmus test for the marriage of the old and new economies.

Instead, management got months of complaints from both senior and junior executives in the divisions involved, who said the e-mail system, initially designed for consumers, wasn't appropriate for business use. Among the problems cited: The e-mail software frequently crashed, staffers weren't able to send messages with large attachments, they were often kicked offline without warning, and if they tried to send messages to large groups of users they were labeled as spammers and locked out of the system. Sometimes, e-mails were just plain lost in the AOL etherworld and never found. And if there was an out-of-office reply function, most people couldn't find it.

The various types of e-mail software used by employees aren't the same as those used by America Online subscribers at home. Instead, the divisions customized AOL products, such as those from its Netscape unit.

Time Inc., the U.S.'s largest magazine publisher and a heavy e-mail user, was the company's worst-hit division. Late last year, ad sales executives in Entertainment Weekly's Chicago office were trying to e-mail a presentation to a major advertising agency. Because the system has trouble handling large attachments, the e-mail didn't arrive. At the last minute, the office had to send a staff member in a cab with a printed version.

Norman Pearlstine, Time Inc.'s editor in chief, recalls that e-mails containing final page proofs of some magazines never made it to his computer because they were routed to an old e-mail address. He also inadvertently offended then-People magazine Managing Editor Carol Wallace by failing to reply to her e-mails. He just hadn't received them.

"The system didn't work well for heavy data and graphics users," says Edward Adler, an AOL Time Warner senior vice president and corporate spokesman.

But there was more. Staffers groused they had to log onto their office computers using a portable electronic number tag that sometimes broke; and they grumbled they were no longer able to use portable e-mail devices, such as BlackBerries, because they weren't compatible with AOL. In late January, executives at Warner Music tried to alert employees to problems with the new system. "Two percent of e-mail is being lost," the internal e-mail read. "If you are expecting critical e-mail, you may want to follow up with the sender."

Apparently weary of the complaints, at a regular meeting of top executives Wednesday, the company decided to allow divisions to use any e-mail system they want, including those from IBM Corp. and archrival Microsoft Corp. If the divisions choose outside products, their e-mail systems likely won't be housed on America Online's servers in Dulles, Va. Some members of the company's tech staff have dubbed the reclamation plan "Project Phoenix."

Divisions will now be able to pick "the system that better suits their individual business needs," says Adler.

The reversal is particularly awkward for Robert Pittman, AOL Time Warner's co-chief operating officer, who had pushed through the move to use AOL's e-mail. Pittman wasn't available for an interview, but Adler, the spokesman, says that divisional CEOs had agreed with Pittman's decision.

The initial idea for communal e-mail was driven in part by cost. By using its own products, such as AOL Mail or Netscape's software, the company could save millions of dollars because it no longer would have to pay license fees to other software companies and could reduce staff. Then there was the matter of corporate pride: "It's true that it was a policy decision by the AOL Time Warner leadership that we should set a good example by using our own products," says a top information-technology executive at one of the divisions.

Employees of the old Time Warner, already resentful of their corporate bosses at AOL, saw the imposition of AOL's e-mail as corporate arrogance. When computers crashed in the Washington bureau of Time magazine because of the e-mail software, staffers sometimes sung out, "So easy to use, no wonder it's No. 1," an ironic reference to America Online's ad slogan.