Auth failed error is usually when a client can reach the server, but i will ask anyway. Is you friend connecting from outside of your network? What do you and your friend put into server part of the login? If he puts there your server’s name, then is it resolvable by dns? You can try putting your server’s IP address. If it has internal IP, then you should forward 5222 port from your router (which is on the external network) to your internal machine with Openfire, and then your friend can put IP of your router as a server.