Loral Win Transcends Pentagon

The Department of Defense messaging program is a significant precedent for commercial markets, giving Microsoft and Lotus the opportunity to increase market share

The Pentagon's program to build a secure electronic mail system not only lured defense giant Loral Federal Systems Co., but two of the hottest software companies today, Microsoft Corp. and Lotus Development Corp.

Although the contract's monetary value of $500 million was an attraction, it likely was not the only one. In fact, Microsoft and Lotus wanted a piece of the half-billion award desperately enough to be on every team that bid the contract. Loral's competitors for the Defense Message System included Computer Sciences Corp., Electronic Data Systems Corp. and PRC Inc.

For Microsoft, the contract provides the opportunity to gain a bigger share of the electronic mail market, which the company has tried to do for some time. Company officials said the contract was one of the most important messaging contracts in a long time.

Lotus, on the other hand, gets the chance to flood the market with its already highly popular Notes product. Lotus officials would not comment on the award, but sources said the company made heavy research and development investments to address the Pentagon's security requirements.

The Pentagon will mandate use of the system by 2 million personnel, and civilian federal agencies also can purchase E-mail products and services from the contract. When the DoD began planning its acquisition, defense officials knew they wanted a system based on commercially available products modified to provide secure E-mail capability.

Officials visited a number of companies to determine whether they would have a need or interest in the unique E-mail verification and authentication features of the system. If the commercial marketplace created a demand for such E-mail products, the Pentagon could take advantage of lower prices resulting from increased competition for the most advanced technologies.

Warren Suss, a telecommunications consultant and analyst in Jenkintown, Pa., said the tamper-proof features available in the Pentagon's system apply to almost any type of sensitive business communication from corporate strategies, acquisition plans and research and development projects.

The defense system also is based on open systems E-mail standards that allow organizations to substitute one product for another without degrading the overall system. "The U.S. marketplace hasn't really matured in this country," Suss noted. "Until recently, there were not very many products that were widely sold that complied with the standards."

Although demand has been growing now for such products, the defense system "will jump-start this industry. It will create a critical mass," Suss added.

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