Microsoft and Lotus Prepare for DoD Rumble

As Lockheed Martin Corp. runs the $1.6 billion Defense Message System program through its final testing phases, the key electronic messaging vendors are about to square off in what promises to be a spirited contest to decide who will walk away with the coveted DoD calling card -- pre-eminent supplier for the world's most secure messaging system.

Adding spice to the whole affair will be a comparatively tiny upstart called Enterprise Solutions Limited of Westlake Village, Calif. The five-year-old company has somehow managed to secure a critical role on the DMS infrastructure with its X.400 and X.500 products and will also make a play for desktop and server revenue.

All three of the players are giving their marketing plans a final check , fine-tuning pitches and presentations even as A-Team sales forces are fielded around the world.

"We have built a sales force here of about 85 people -- including support people -- who will work closely with the government on a worldwide basis," says Bruce Weber, Microsoft's Exchange marketing manager for the federal market.

Lotus is similarly deploying a significant sales team, according to Joe Forgione, vice president of business multimedia products.

"We are combining Lotus and IBM resources on a worldwide basis to make it clear to potential customers that we are making DMS one of our major strategic thrusts in the Notes business," he says.

All of the companies on the Lockheed Martin team have spent years responding to requests for information and submitting proposals. Each has invested enormous resources tailoring products to meet stringent military standards without losing the off-the-shelf look, feel or cost. And yet, since the DMS is an indefinite-delivery, indefinite-quantity contract, there is no guarantee that being on the Lockheed Martin team will bring success. Indeed, beyond cooperation in the standards compliance and interoperability labs, the contract's design has done everything possible to pit companies against each other in an effort to provide military users with choices associated with an open market. It begs the question: Why take this risk on a finite, 2 million-seat market?

The answer lies in the fact that there is more to the DMS contract than meets the eye. It turns out that success within DMS may be the key to penetrating several large and distinct markets beyond the DoD.

Sister Agencies and Trading Partners

In setting functional and performance standards for communication, DMS will become a de facto requirement for any organization that wishes to exchange information with any branch of the military.

"With two million DoD users expected to be running and using DMS by the turn of the century, there will be a significant part of the government using DMS," says Mark Levitt, electronic messaging analyst with International Data Corp.

"At the very least, he predicts other agencies and trading partners who deal with DoD will need some level of access to the DMS.

"Organizations such as the Central Intelligence Agency, the State Department, the Treasury Department -- and other departments that interact with DoD... will look to DMS as an available option for messaging later on," he says.

"Vendors also expect the DMS to find a receptive audience among the thousands of companies that do business with the DoD every day, shipping everything from shoes to satellites. An increasing number of these transactions are being executed electronically with the adoption of electronic data interchange and electronic commerce strategies. And on the high end of the market where military and civilian engineers must collaborate on technical design and manufacturing, the groupware vendors hope to see demand grow for the more sophisticated features available on their respective offerings.

Friendly Foreign Governments

Beyond the U.S. military units, friendly foreign governments are expected to find DMS-type capabilities attractive.

According to industry observers, the DMS technologies will be subject to fairly standard export control regulations that prohibit sales to countries such as Iran, Iraq, Libya and North Korea. But there should be few barriers to selling DMS products to allies.

Other Civilian Agencies

Even though most civilian agencies have little need for the extreme security and performance features that DMS requires, the program will serve as a model upon which other government infrastructures are built.

Efforts are already underway to establish governmentwide standards for computers and communications among non-military agencies by the Electronic Program Management Office in the General Services Administration. According to IDC's Levitt, the EPMO has identified many similar needs.

"For instance, they have a lot of the same requirements for authenticating who is sending a message and establishing nonrepudiation, which prevents a sender or receiver from denying that a message has been sent. Whatever [EPMO] creates will almost certainly be compatible with DMS. The basic architecture and many of the protocols and functionality will be the same," he says.

Companies that are already active with DMS should be well-positioned to move into these markets.

Competitive Analysis

The competition in DMS between Microsoft, Lotus and ESL will very much reflect the battle that has been joined in the commercial market.

Microsoft plans to tout Exchange as the most innovative application in recent history, and subtly hint that it is the ideal option for shops that have made a commitment to the increasingly popular Windows NT network operating system. Microsoft had better play that last point carefully lest it refuel critics who say that a more defined Chinese wall should be set up between its application efforts and its operating system initiatives.

Lotus will counter by pointing out that it is the most mature and proven groupware solution in the market. It will stress that it has 6 million seats on-line today, and that unlike Microsoft -- which only works on the NT platform -- Notes is a platform-neutral solution. It is interesting to note that while Lotus eventually intends to support a variety of network operating systems, including several flavors of UNIX, early adopters of Notes DMS have opted to pursue a Windows NT strategy.

ESL will explain to everyone who'll listen that the reason it's the exclusive player on DMS' backbone is because it's the only solution on the contract that is completely compliant with the X.400 messaging and X.500 directory services standards. This adherence to the standard, they'll say, makes them the most scalable and flexible client/server solution in heterogenous shops that simultaneously support DOS, OS/2, Macintosh and/or UNIX.

While it will be a three-way horse race, conventional wisdom has Microsoft and Lotus getting the lion's share of the client/server market for several reasons.

"One is that from a mind-share perspective, people know who these players are. And two, the government already has many cc:Mail [which years ago was bought by Lotus] and MS Mail users in place," says Levitt.

"Each of those two vendors will obviously do their best to upgrade their current customer base to the DMS environment," he says. But given the messy environment that exists in the DoD -- at last count there were 45 different messaging products in the Pentagon alone -- there is every reason to believe that ESL will have its share of opportunity. At least for the next year or so.

After a base period of two years, the DMS contract allows for other vendors to submit their products for testing. By 1998, the DMS environment will get complicated because the flood gates will be open to any vendor wanting to compete within the contract.

"Once the government starts accepting other products for testing, companies like HP, Novell and a whole slew of other vendors will be banging down the doors of all those DoD units that have yet to make the migration to DMS," Levitt says.

In the meantime, look for Microsoft and Lotus to spend the next 18 months locked in an aggressive scramble to bring users into their respective folds.