Once Lotus Notes was synonymous with groupware. Now it faces stiff competition from rival providers and the Internet.
'It's groupware, Jim, but not as we know it.' Thus might Star Trek's Dr McCoy diagnose the dilemma facing prospective users of groupware software.
A market which for so long has been synonymous with a single product, Lotus Notes, now seems disturbingly wide open, with as many new definitions of groupware abounding as new providers. More striking still, it seems that the software companies which produce groupware may have been wrongfooted by a brand-new IT technology - the Intranet, a corporate Internet-in-miniature - which may offer businesses most of the same functions at a lower price, while liberating users from the need to tie themselves to one single groupware vendor. Far from finding themselves in charge of an enormous money-spinner, both Microsoft and IBM, the new owners of Lotus Development Corporation, now face the possibility that they have invested millions in a market that is about to go phut.
In theory, the task addressed by groupware is simply stated. Much commercial activity involves passing documents around an organisation either for internal administrative purposes or because it is the nature of the business (insurance claims or mortgage applications processing, for example).
And, with more and more work done on networked desktop computers, it makes sense for organisations to harness those computers in such a way as to make the flow of information as efficient as possible. In the process, all you need to do is include a mechanism for people to exchange messages, such as electronic mail and discussion group bulletin boards, and a facility for 'publishing' common information such as personnel manuals, some software for coordinating people's diaries, and a way of allowing them to send each other spreadsheets and word-processed documents in their native format, and you've invented groupware. While there are many similarities between this and simple networking, groupware is accessible to non-IT specialists, and is intended to mirror the way in which people work together.
The flagship groupware product, Notes, was launched by Lotus back in 1989. Keen to diversify its product range out of the 123 spreadsheet niche, Lotus spotted the potential in an idea being touted by a start-up rival and bought the company in a deal which must surely count as one of the most lucrative in the industry since Microsoft's Bill Gates acquired DOS for $50,000 in order to sell it on to IBM and other computer vendors for millions.
It took time for people to latch onto the groupware concept. The idea was fine, ran the typical reaction, but was there a real business need for the product, and anyway, who had enough networked PCs to make it worthwhile?
Perhaps not surprisingly, early users included large global organisations such as accountancy and consultancy firm Price Waterhouse (PW), which saw sufficient merit in Notes to place an order for 10,000 copies. These days, with 40,000 corporations around the world using Notes, PW is 'if not the largest user, then in the top three,' according to partner Roger Tilley. With PW's multi-national client base, 'Notes helps us work globally 24 hours a day,' he says. There have been other benefits, too: 'All our core business systems are written in Notes so knowledge doesn't get lost any more.'
This combined theme of global operation and groupware-as-infrastructure is a recurring theme. As Mike Bertram, director of computer systems architecture for pharmaceutical giant SmithKline Beecham, points out, it is because his company is a global entity that groupware is so important to it. 'All our R&D is integrated transnationally,' he says. The result of groupware, he claims, is that 'when we set up an R&D team, we have the IT infrastructure already in place'. Key groupware features such as e-mail and bulletin boards have changed the whole approach to meetings, he adds. 'You can have a lot of discussion beforehand, thus cutting down the time spent face to face.' This may sound strange to some ears, but academic research has shown that people respond more honestly in such forums, with less regard to the political and organisational niceties that must be observed when interacting physically with peers and superiors.
As desktop computers and network links have become more pervasive, the global demand for groupware has expanded. Since Notes' launch, sales have consistently grown at over 100% a year. But, according to Sean Haffey, a groupware consultant at IBM UK, 'a truly explosive growth in sales following IBM's acquisition (in June 1995) of the product' has added an especial fillip in recent months. At the time of the takeover, Haffey claims, sales of Notes had just topped 1.5 million licences, but by January 1996 that figure had shot up to a staggering 4 million. It is, however, difficult to disentangle the various effects at work here: Notes' cost-per-user has dropped to around a quarter of its price 18 months ago; IBM claims there has been the halo effect of the association with Big Blue; and the growth dynamics of a product whose time has now come has also had an impact.
With increased sales has come increased competition. It is significant, for instance, that when the networking company, Novell, sold off its WordPerfect division to Canadian graphics software vendor Corel in January, it retained the GroupWise product it had acquired in its purchase of WordPerfect Corporation two years before. As with the halo effect that IBM claims for Notes' sales, Novell is trusting that its reputation in computer networking will increase GroupWise sales. UK managing director Tom Schuster, however, concedes that the battle with Lotus/IBM for sales is hampered by the need to cooperate with it. 'Lotus is a partner,' he says. 'Novell technology is what ties their customers' Notes' networks together.' Somewhat lamely, therefore, a recent press release from the company boasted that Novell had eclipsed Microsoft in 'mindshare' in a survey of IT professionals - omitting all reference to Notes or to the fact that Microsoft did not have a product on sale at the time.
That deficit has now been remedied with the long-awaited arrival of Microsoft's Exchange groupware product, launched last month. (It appeared two and a half years after the originally intended launch date.) 'We've taken a lot of heat for being late,' admits Brian Valentine, general manager of the Exchange product unit. Exchange had better be a success. Caught wrongfooted several times recently, Microsoft has been forced into U-turns with a number of new products. Touted as a 'Notes-killer', Exchange cannot afford to be one of them. Although some industry pundits are crowing that Microsoft has had to abandon some of its earlier design intentions in order to get the product to the launch pad, this seems wide of the mark. Exchange is different from the product that was originally envisaged, concedes the company, but the software business is a fast-changing environment, and changes to the original specification merely reflect the fact that requirements have changed.
This may not be mere hyperbole. For once, in an industry and a company known to try to impose their will on consumers, Microsoft has developed Exchange by attuning it to the needs users have rather than those the company thinks they ought to have. Some 42 global businesses, including Shell Oil, Nabisco, Glaxo and Bass, have spent the last three years working closely with Microsoft, helping to design and test Exchange's features, and running it in beta form within their own companies.
According to Allan Paterson, director of corporate IT strategy at Bass, Exchange reflects 'real-world requirements'. 'When we looked at Notes, Lotus had difficulty in articulating to us what it was for. To us, groupware is messaging,' he says. His comment cuts to the heart of the difference of opinion between Lotus and Microsoft about what groupware is and should be. Lotus' view is still that of a structured Notes-oriented world. To Notes, everything shuttling around the network is a Notes document, with other information - forms, spreadsheets, e-mails and so on - attached.
And although, thanks to the Internet, that is changing, Notes still rules its own ordered universe. Microsoft's view is of a world where messages - the same list of forms, spreadsheets and so on - should arrive 'as is' and be received by a system intelligent enough to identify their source and process them accordingly. In contrast to the multiplicity of media through which incoming information reaches people today (physical files of documents, phone calls, e-mails, meeting requests, expense claims and so forth), Microsoft's vision is of a networked world where everything routes through Exchange. 'If an expense claim from a subordinate arrives, I want to be able to append a digital signature.
If a message from Bill Gates arrives while I'm out, I want the system to sound the alert and copy it to my pager,' explains Valentine.
A core of third-party software houses has been busy creating add-ons to augment Exchange's basic functionality in order to create this intelligence. Los Angeles-based Octel Communications, a $500 million player in the corporate voice-messaging market, is one such. According to director Paul Cheslaw, voice-messaging is at a crossroads. 'A growing sector of the market also uses e-mail,' he says. 'What people want is a single device to handle, show and store all incoming messages, be they faxes, voice-mails or e-mails.' Octel's software, which users can incorporate within Exchange, lets people view their messages as a seamless whole. 'It won't be necessary to carry a laptop computer about with you to read your e-mail,' says Cheslaw.
'Exchange will read your faxes and e-mails out to you over the phone.
You'll be able to reply to e-mails by voice thus clearing your incoming e-mail over the cellular phone on the way to the office.'
While this sort of sophistication will doubtless prove attractive to some users, much depends on Exchange's ability to deal intelligently with such an open view of the groupware universe. Notes, by setting itself a less complicated task, needs to apply less effort to the task of knowing how to handle the information transmitted, a pragmatic simplification that may turn out to be entirely justified.
Both systems, however, are coming under fire from Intranets which offer a fairly straightforward 'anything goes' system with full links to the Internet and attempts rather less by way of complicated bells and whistles.
Worryingly for Lotus and Microsoft, both users and IT pundits are embracing the Intranet, claiming it offers that very simplicity, with less cost, and without tying businesses to the software solution of a single vendor.
The term Intranet is quite recent (it emerged last year); although the concept itself is not, as with many new pieces of jargon, however, there are differences of opinion over exactly what it is. The core definition, though, is one where an organisation's network architecture is modelled on the Internet, and can thus employ some of the burgeoning quantity of freely available (and cheap) standard non-proprietary software, instead of Lotus Notes or Microsoft Exchange.
Companies thus develop their own mini-Internets with gateways to the wider Internet for external communication. Over one quarter of America's 1,000 largest companies are already using Intranets, and the number is growing rapidly.
The market for the necessary software (Web browsers and servers) is fiercely competitive, with companies such as Netscape Communications literally giving away its browsers to non-corporate users in order to grow its marketshare. Netscape now reportedly sells almost three-quarters of its Web browser software to companies for use on Intranets, and almost one half of Web server computers are now deployed on Intranets according to one recent estimate. Intriguingly, therefore, one of Microsoft Exchange's principal competitors may be the company's own Internet Explorer Web browser.
According to Hewlett-Packard's Ilana Ron, HP's own Intranet links 35,000 users around the world, who achieve 700,000 'hits' per day on more than 800,000 pages of content. 'All our business is there,' she says. 'Product files, prices, people information, spreadsheets ... the enabling change is digital data.
Once it's digital, it's easier for us to publish.' 'We're seeing far more interest in the Intranet within the corporate world than we are with the Internet,' adds Peter Simkin, vice-president and co-founder of Solihull-based Firefox Communications, whose successful NASDAQ flotation was covered in the February issue of Management Today. 'Compared with Internet servers, there are 10 to 20 times as many Intranet servers. With a Web server and a Web browser, you've got a poor man's Lotus Notes.' Or, for that matter, a poor man's Microsoft Exchange.
Certainly, the savings made can be significant. For clients waiting to run groupware software will typically need hundreds, thousands or tens of thousands of copies - one for each employee on the network. For bulk purchases, Lotus charges £47 per licence or £37 for a cut-down, mail-oriented version. In comparable numbers, a licence for Microsoft's Exchange costs £37. Web browser software, meanwhile, costs anything up to £25 - the price charged by Netscape to corporate users for its Navigator software - but may even come free.
Hardly surprisingly, the prospect is causing sleepless nights at both IBM and Microsoft, who are both trying their utmost to counter the threat. A groupware market which less than a year ago seemed to justify IBM spending £2.2 billion acquiring Lotus - principally for its Notes product - now appears worryingly volatile.
'(The Intranet) is a collection of different tools to perform different tasks in the hope that they'll integrate. Notes is already integrated - and does far more,' is how Lotus' Chris Vezey pours cold water on Intranet technology. Meanwhile, he rubbishes the notion that Intranet Web browsers are free and claims that, with volume discounts, Notes-per-seat costs are virtually the same. Nevertheless, he acknowledges that Notes has been modified to interact with the Intranet. 'By mid-1996, people will be able to look at a Notes server with a Web browser,' he concedes.
Meanwhile, Microsoft's tactic has been to point out where Intranet technology best complements Exchange. 'Intranets are fine for publishing one-to-many information such as personnel handbooks and the like,' says Microsoft's Phil Cross, product manager responsible for marketing Exchange in the UK. 'People can use the same Web browser they use at home to access statically published information. But it's not efficient to build that information using Intranet technology, nor is the Intranet a sensible way of communicating messages within the organisation.' Nevertheless, Microsoft has just entered into an Intranet alliance with MCI Communications and Digital Equipment, and it turns out that Exchange say it will launch a Web browser if required, tailored to a user's preferred Web browser or Microsoft's own.
But for Nitsan Seniak, R&D manager at Paris-based software company ILOG, for example, the case is clear-cut. With offices in the US, Singapore and the UK, the firm needed a groupware solution and chose the Intranet.
Not only was the software cheaper than the alternatives and non-proprietary, but users already had experience of Web browsers, and were able to create their own Web pages. It was also easy to work up people's enthusiasm for anything to do with the 'suddenly sexy' Internet, says Seniak. 'We went to the top management and said: "It's better, cheaper, easier and people are all fired up about it." That's a tough argument to rebut.'.