Got A Question? Microsoft's Newly Acquired Software May Have The Answers

Microsoft will be getting chattier with its customers soon.

The world's largest software company said Thursday it had acquired privately held Colloquis Inc., which makes software that lets customers instant message with a computer to get answers to tech-support questions or information about new products. Microsoft plans to use the technology to let consumers of its Xbox video game console get online tech support in the coming weeks and eventually plans online agents that can promote new products and serve up ads. Terms of the deal weren't disclosed.

Colloquis, which was founded six years ago and maintains offices in New York and Silicon Valley, counts among its customers Cox Communications, Panasonic, Time Warner's cable television and AOL units, and Internet phone company Vonage Holdings. Microsoft was also a customer--its online Encarta encyclopedia software uses the technology to provide maps and other graphical answers to users' questions. Microsoft plans to continue selling the software to Colloquis' customers.

Colloquis' technology lets Web users type free-form questions into a text box and receive conversational answers via artificial intelligence technology known as natural language processing. The technique parses typed-in sentences to identify their subjects and other parts of speech, then assigns levels of importance to certain words. "The best example I can give is if someone types in 'My e-mail sucks,' the natural language processing agent is able to understand that," says Clinton Dickey, a group product manager at Microsoft who worked on the deal. "It's about replicating live agents."

Companies have been building self-service Web sites for their customers for years, but many lose money and aren't widely used because their information is out of date or too closely tied to keywords that Internet users may or may not enter in their inquiries, says Sheryl Kingstone, an analyst at market research company Yankee Group. "The company would spend all this money on a self-service Web site, and no one would use it," she says. Instead of requiring programming hard-and-fast rules about how users can interact with a system, natural language technology is more flexible.

According to Microsoft's Dickey, supporting Xbox customers is just the first step in the company's plans for Colloquis. Microsoft hopes to build avatars, or virtual online characters, that users of its Windows Live Messenger software can interact with by sending instant messages--for example, to a character in a new movie. Advertisers could insert spots into the IM conversation, he says. Colloquis' technology could also be combined with speech recognition and synthesis software to let drug companies build apps that connect patients and doctors, or let software companies provide technical information to developers. "We're just scratching the tip of the iceberg here," says Dickey.

Microsoft in the past year has concentrated its acquisitions on small companies with specialized technology. Its acquisitions this year have included Azyxxi, a medical software system; Seadragon Software, which makes online visualization software; MotionBridge, a maker of search engines for PDAs; and Winternals Software, which makes software for managing networks of PCs.

Colloquis' 36 employees will join Microsoft, and its management team will depart after Microsoft integrates the company's technology with its own, Microsoft said.