CIO — Technology vendors have begun selling tools that allow companies to build social networks internally for their employees. But recent research and interviews with analysts suggest that the adoption of these tools has been slow due to a lack of engagement by users and the stiff competition for their time posed by sites such as Facebook.

The perceived need for internally controlled social networks stems from the fact that companies want to give their employees the capability to collaborate over them but don't want to see intellectual property exposed on Facebook or other sites in the consumer space, says Oliver Young, a Forrester analyst.

"As people use social networks for business and personal communications, it becomes more problematic," he says. "More [corporate] information has been finding its way into consumer social networks than companies would like."

Based on recent research on Web 2.0 spending , however, Young says he expects that companies will be slow to embrace social networks internally, but will push forward with building them for external interactions with customers.

In 2008, Forrester expects companies with 1,000 or more employees to spend approximately $110 million for building externally facing social networks, while only $60 million for the internal variety. Over time, that gap will widen. By 2013, the consultancy predicts external spending to reach $1.7 billion, while internal spending will hold around $208 million.

Young believes the reason for the lack of adoption internally will be because a good social network, by its very nature, relies on the network effect. If people don't embrace it collectively, it can quickly become irrelevant and useless.

"If a company starts one, and only half the people join, the value is already much lower," Young says.

Facebook and the Power of Incumbency

Any internal social network also must compete for eye-share with established consumer networks. If a company doesn't ban consumer social networks outright, the chances of their users dedicating time to the enterprise social network decreases, says Jonathan Yarmis, an analyst with AMR Research.

"They're competing with the public social network," Yarmis says. "The challenge they have is that the public ones can replace the private ones, but the private ones can't replace the public ones."

While analysts make their projections, the technology to make these internal social networks is still in its infancy, and finding examples of them can be tough. Web 2.0 vendors have only recently added internal social networking capabilities to their offerings to make themselves more of a one-stop for internal collaboration. Jive Software, which makes blogs and wikis, added a profiles function recently, as did Socialtext .

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