ORLANDO, Florida--Even as the advance team of Lotus Development technicians busied themselves hooking up data ports and preparing the red carpet for the groupware king's gargantuan annual trade show here, rival Netscape Communications (NSCP) was hard at work stealing its thunder.
In an agreement announced last week, KPMG Peat Marwick will deploy Netscape's Communicator and SuiteSpot groupware software to build a new intranet site for use by the accounting firm's 18,000 U.S. employees working out of 120 offices nationwide. The agreement, which adds KPMG to Netscape's growing list of corporate customers, is a big score for Netscape and its groupware products, which are still in the gestation stage and not expected to enter the commercial market until the second half of the year.
For the Mountain View, California-based groupware neophyte, the deal underscored Netscape's arrival as a business software heavy-hitter. It also serves as a reminder of the increasingly competitive and rapidly changing state of the groupware universe.
In recent years, the battle for market share has largely been a three-way race. Lotus is widely considered the market leader, with 9.5 million seats installed worldwide. The company is trailed by Microsoft and Novell.
However, analysts have been predicting for months that Netscape will push Novell out of third place and engage the remaining top players in a heated battle for market supremacy this year.
The Gartner Group estimates that Lotus Notes holds a 38 percent market share, with Microsoft's Exchange capturing about 31 percent. Once the Netscape products join the fray, Gartner expects the company to zoom into third place, displacing Novell and rapidly gaining a market share in the low teens by 1999.
The Meta Group is even more optimistic about Netscape's prospects. The consulting firm estimates that Netscape will hold 20 percent market share, with Lotus and Microsoft duking it out at 30 percent and Novell hanging onto a 10 percent share by the end of the decade.
Market composition is not the only rapidly changing variable in the groupware arena. Product offerings are changing as the lines between groupware and other software types begin to blur.
"I sometimes call it gropeware," Gartner analyst Tom Austin said. "It has always been a lousy category." So-called productivity suites and complex business process software have of late taken on new collaborative computing capabilities. For instance, Microsoft Office 97 offers several new Web enhancements, including a product called Outlook, which offers many groupware functions from within the Office suite. Meanwhile, Lotus has made productivity programs like Microsoft Word and Web browsers like Explorer or Netscape Navigator accessible without leaving its Notes environment.
Traditional groupware also has started to lean in other directions; Lotus Domino add-ons offer a clear example. The company has delivered an electronic commerce software tool called Domino.Merchant and will soon release Domino.Service, a customer service software that sounds less like groupware than Web-enabled business apps from companies such as SAP and PeopleSoft.
Throwing down his Java-enabled gauntlet, Lotus strategist Mike Zisman told a crowd at the Lotusphere extravaganza in Orlando here that the company is still figuring out how to package and sell individual Java components sheared from its feature-rich Notes client. "We are considering everything," he told reporters, ticking off a list of possible approaches, including licensing fees and per-click charges.
The size of the groupware market is also undergoing major changes. Lotus, for example, saw 115 percent growth in Notes client sales last year. Executives say they will grow the install seats to 18 million by year's end. Meanwhile, Gartner Group expects Lotus to end the century with some 50 million Notes clients on desktops. If Lotus maintains about a third of the market, that would translate into a total installed base in the ballpark of 150 million users.
Large companies with dispersed operations like KPMG will continue to fuel market growth as they move most corporate communication tasks onto intranets. The sites will increasingly serve as the communications backbone at Fortune 500 companies, not just to reach employees but also suppliers and their customers.
Yet these major players are also exploring opportunities with entirely new markets--small and midsized business, home-office workers, and even general consumers. Lotus is already shipping some standalone products like the Weblicator browser accessory, which offers Notes replication to anyone interested in buying it $29 apiece. The groupware pioneer is also renting apps via Netcom, and Oracle has launched a similar experiment deploying some features of its groupware through a national Internet service provider.
However, analysts say, the true groupware wars will not begin until the second half of the year, when market leaders debut finished products that combine serious Internet Protocol support and a wealth of features. In the meantime, they warn not to expect life to get much easier.
"This becomes an integrator's world in the next year or two," said Meta Group's David Yockleson. While cost of ownership has fallen thanks to the Net, he estimates that a user must still pay about $500 per year to run groupware like Notes.
As for the openness question, Austin said: "They have been proprietary all along, and they are proprietary today."
Still, Lotus, Microsoft, and Netscape--and, to a lesser degree, Novell--are sitting pretty in this marketplace at least in part because of their proprietary business model. They each boast large, loyal installed bases that are wary of best-of-breed technology cocktails that have gained in popularity. Such customers not only lend brand recognition but also help attract independent software developers and systems integrators, who hold the keys to the marketplace.
That's where Netscape has a running start. It may be only two years old, but it will enter the groupware market this year with the brand recognition and developer support of a veteran.
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