When Microsoft (MSFT) seriously moved into the groupware market with the introduction of the Exchange Server in 1996, many observers thought Lotus Development would quickly lose its position as the market leader.
Then, when intranets became hot, industry watchers couldn't understand why anyone would continue to spend time and money on Notes installations, specialized Notes development, and full-time administrators when a simple Web server could suffice.
Despite the best efforts of Microsoft, Netscape Communcations, and others, Lotus is still maintaining a comfortable lead in the groupware market, according to market analysts.
Now, Microsoft is attacking again. This time, the company is attempting to differentiate itself from Lotus and other competitors in the groupware market through its client software--Outlook 98.
Microsoft has crafted a groupware and messaging strategy that combines Outlook, the client for the software titan's desktop suite, Office; and its own email messaging tool with Exchange on the server. The company integrated the two after customers demanded a more Internet-friendly Exchange, within a package that offered both email and scheduling. As sales gain momentum, the combo may sway buyers into viewing Exchange as comparable to Notes, in their evaluation of groupware packages.
"If you look at what they said over the last year, it was all very server-focused," Forrester Research analyst Eric Brown said. "I think in 1998 [competitive focus] will shift over to the client, and Microsoft will drive this."
Outlook 98 adds support for a slew of standards such as IMAP 4, LDAP, and S/MIME. It also includes support for Internet calendaring standards.
Notes 5.0 along with Lotus client software offers pretty much the same support, combined with the Domino 5.0 Web application server.
In addition, the scheduled release of Notes 5.0 features a number of enhancements. The package combines email, calendaring and scheduling, personal document management, newsgroups, browsing, and native HTML authoring in an integrated client that can access standards-based Internet servers.
The Outlook/Exchange duo entered the market in 1996, around the same time Lotus started boosting Notes with more Internet capabilities. By mid-1997, analysts say the market leaders began offering groupware packages that looked remarkably alike and featured similar capabilities and support for Internet protocols.
Today, both Exchange and Notes have established their Internet legs. The two duke it out in the groupware space, though Microsoft retreated from earlier rhetoric about Exchange being a "Notes killer."
That could change soon. One reason Brown believes a shift will happen is that Microsoft can't help but take advantage of Lotus's two delays in releasing Notes 5.0, once in September and again in January. The company attributed the setbacks to customer demands for more time between release 4.6 and 5.0. They also said they wanted the release of 5.0 to sync with Windows NT 5.0, due out the second half of this year.
In addition, the Redmond, Washington, software giant has a window to spread the word about Outlook 98 because it is out and being downloaded from Microsoft's Web site months before Notes 5.0 client and server software even ships, analysts say.
Microsoft also bundles the client software with its Office applications suite, giving it an added customer base, International Data Corporation analyst Mark Levitt says. "Outlook 98 will be on millions of desktops? Since customers already have the Outlook client on the desktop they may also want to use Exchange as their server."
Although Microsoft is taking advantage of these factors, it doesn't mean it's necessarily shifting away from Exchange as the center of its groupware and messaging strategy, Outlook product manager George Meng contends.
"It's not really lessening the focus on Exchange really. I think it has to do with timing more than anything. What you have here is the buzz around a new product. Outlook 98 is just coming out so we're just focusing more on it. It's not a shift," he said.
However, Meng concedes that the delay with Notes 5.0 shipping and the bundle with Office does help. "So many people use Office. It's definitely a positive thing. Users can have a complete solution if they want to bring in Exchange as their messaging server."
Despite these benefits, however, analysts agree that Notes and Domino still command the market, with 20 million users to Outlook's 13 million, according to Giga Information Group analyst Mark Cecere.
"The onus is still on Exchange to catch up," Brown said. "Notes is still the product to beat as far as market share goes."
And it's not as though Lotus hasn't been counted out before. When the idea of the intranet began to bounce around, a lot of analysts considered it the beginning of Notes' last hours.
"Everybody thought that Notes was through," Brown recalls. "People looked at the Web as the new way to communicate between each other and thought, 'Who needs Notes?'"
But the early criticism of Lotus, a subsidiary of IBM, worked to its advantage. Developers at the company worked quickly to transform the product, and the merger with IBM in 1995 allowed the Cambridge, Massachusetts-based firm to integrate browser technology into Notes, giving it what it needed to enter the new Web-based messaging world.
"Being picked on early was a good thing," Brown says. "They got the wake up call early enough to transform."
So what will be the result of this latest challenge from Microsoft?
Most observers say Lotus will survive, noting that the next release of Notes has many enhancements that may keep the company at the head of the groupware pack, including not only Microsoft but also Novell, with its GroupWise product; and Netscape, which has begun putting groupware-like functions into its browser. For example, for the first time, Notes 5.0 combines what users relied on in earlier versions of Notes, cc:Mail, Lotus Mail, Weblicator, and Organizer into one client.
And Cecere said Outlook isn't quite as developer friendly as Notes. However, he said, "I think both will be very successful."
Brown says he believes that Microsoft will continue to use its strength in other markets, like desktop software, to leverage Outlook. "It will push it as a usable friendly application," for all occasions.