Big Blue asserts that its Workplace initiative is gaining ground, pitting IBM directly against Microsoft in desktop software.
The Lotus division, which includes IBM's Notes, WebSphere Portal and Workplace products, turned in a 17 percent year-over-year revenue increase in the second quarter--the third consecutive quarter of double-digit growth.
That financial performance, highlighted by CEO Samuel Palmisano's quarterly review to employees, demonstrates that IBM's Lotus division has successfully reinvented itself and the market it competes in, Lotus General Manager Ambuj Goyal said last week in an interview with CNET News.com.
"For the first time, Lotus is becoming a jewel in IBM's software crown," said Goyal, who will become general manager of IBM's information management division later this month. He will be succeeded by Michael Rhodin.
In sharp contrast, when Goyal took over at Lotus two and a half years ago, the future did not look so bright.
The division's sales were flat, or decreasing and were leading to layoffs and other cost reductions. There were ongoing questions over whether IBM's purchase of Lotus in 1995 was paying the anticipated dividends.
"We were in the doghouse," Goyal said.
His strategy was to pursue a larger market. Rather than focusing strictly on messaging and collaboration software, Lotus launched the Workplace initiative, a product line that addressed "people productivity" in general.
Now, instead of trying to sell upgrades to messaging software, IBM offers a wider set of portal-based productivity and collaboration tools, Goyal said.
IBM's pursuit of the end-user collaboration software market has pushed it into more heated competition with Microsoft. Like IBM, Microsoft is bulking up its Office System product line to incorporate workflow and collaboration tools. The two companies' products--Microsoft Exchange/Outlook and IBM Lotus Domino/Notes--already battle head-to-head in the messaging marketplace.
Microsoft, meanwhile, is quick to dismiss IBM's Lotus division and the company's desktop software initiatives. At Microsoft's partner conference earlier this month, company CEO Steve Ballmer said that the Lotus Notes customer base was "ripe to be plucked" by Microsoft and its partners.
Even though IBM's ambitions in the desktop software arena are not fully known, Goyal counters that customers are responding well to the direction that Lotus has set.
"People who spend the time with us understand and that's why they buy," said Goyal. "I would any day (rather) be better in selling than (in) marketing."
IBM's overall brand of collaboration software is called Workplace, which encompasses a range of "personal productivity" tools, including collaboration tools like instant messaging and Web-based productivity applications for creating text or spreadsheet documents.
In the forthcoming Hannover edition of Notes, IBM will seek to use collaboration tools in the context of a specific task. For example, a person will be able to click on an e-mail related to a specific issue and quickly get access to all correspondences on that topic.
Sticking to standards
The company's strategy is to maintain its current Notes and WebSphere portal customers by offering upgrades while introducing its Workplace suite of standards-based, componentized collaboration tools. The company is also rebuilding its Notes and Domino products around industry standards and IBM's other products, such as its DB2 database.
Last month, IBM acquired PureEdge, which sells tools to build and run forms-based workflow applications. A key reason IBM purchased the company wasbecause the PureEdge software supports the XForms standard for XML-based forms, Goyal said.
The Workplace productivity applications, which include a text editor and spreadsheet, also support the OpenDocument format and will continue to adhere to it as the standard evolves, he said.
Sticking to standards, which will allow customers to more easily exchange data between disparate applications, will help set Lotus' desktop software strategy apart from Microsoft's.
"Microsoft is not embracing (Open Document format). But eventually, over a period of time, standards will win. There is no doubt in my mind," Goyal said.
IBM's overall Workplace initiative covers more than just collaboration software, noted David Smith, an analyst at Gartner. The package also includes Eclipse-based software that can be used with Linux to replace the combination of Microsoft Office and Windows.
As such, Workplace covers a lot of ground and hasn't fully registered in the marketplace, Smith said.
"Workplace is new and not a lot of people understand it. There's some confusion around it," Smith said. He noted that IBM's prospects in selling desktop collaboration software are much better than displacing Windows desktops.
A study published on Monday by the Radicati Group performed a "random survey" of Lotus Domino customers and found 25 percent said that they do not understand IBM's Workplace strategy. The study also forecast that IBM's messaging market share with Domino will decline from 23 percent now to 13 percent in four years.
In response, an IBM representative on Monday noted that the Lotus division's second-quarter financial reports indicate the company is doing well.
For his part, Goyal is bullish on IBM's prospects to grab more dollars dedicated to making so-called knowledge workers more productive. He noted that Workplace products were used by more than 1,500 customers at the end of last year. In the second quarter alone, the customer base doubled.
"Over a period of time, people will understand IBM is in the people productivity business," Goyal said. "It's not a lack of understanding. I think it's a lack of time. Brands take a lot of time to establish in the marketplace."