Holding on to the groupware market

nternational Business Machines Corp. and Lotus Development Corp. want to make the best of the shotgun marriage that IBM Chairman Lou Gerstner arranged when he completed a hostile takeover worth $3.5 billion for the Cambridge, Mass.-based software vendor in June.

One thing is sure: Consultants, resellers, software developers, vendors and others love Notes. That's because Notes is a complex piece of software requiring much customization, tailoring and training. At a recent Notes symposium sponsored by Lotus in Washington, D.C., Notes users included Jones, Day, Reavis &amp Pogue, a 3,000-employee Columbus, Ohio-based law firm, the U.S. Department of Commerce and publisher McGraw-Hill Inc. With such large enterprises adopting Notes, significant consulting, installation, integration and training exist in a wide range of markets for Lotus Notes business partners.

Still, IBM and Lotus must expand to increase the Notes marketplace -- Manzi envisions 20 million Notes users -- with direct sales teams and through alliances. At a recent Wall Street address on the state of IBM, Gerstner announced a corporate mea culpa: His firm wants to amend its ways in dealing with partners, such as distributors and resellers, who help bring IBM products to customers. "Historically, IBM has treated these important institutions as middlemen, as conduits that we can use to distribute our product to the real customer. No longer. We now view these people as critical customers themselves. Our job is to help them succeed and make money." Gerstner went on to laud Lotus' work with distributors, resellers and vendors and stated that IBM intends to emulate that strategy.

Still, that hasn't stopped IBM and Lotus from providing generous incentives to their direct sales teams to sell Notes and SmartSuite to corporations. Will that cross some heretofore loyal resellers? IBM's vice president of channel marketing, Ian Bonner, said IBM/Lotus won't steal any customers from its resellers and vendors because the marketplace is simply too large. "We believe with the synergy of the two companies being brought together and the expanded opportunities that will be on the table, everybody will have their plate so full they won't see conflict arise," he said. The harvest is great, but the laborers are few.

But resellers are nervous. Rod Labby, marketing manager for Rochester, N.Y.-based Lotus Notes partner Computer Clearinghouse, and his customers appreciate the financial backing IBM brings to Lotus as a result of the purchase. But he notes that purchases such as IBM's make smaller developers, who rely on the technology, scramble to adopt the new products that evolve. "It's hard for a [smaller] company to keep up with the technology. They don't have a lot of R&ampD money," he said. His firm, founded in 1980, has developed Lotus Notes imaging products for approximately a year and has about $20 million in annual revenues.

The symbiotic relationship between Notes and its developers also has a dark side. Labby recalls one official at Lotus who "was almost rubbing my nose" in the fact that Lotus can win imaging contracts over firms such as Computer Clearinghouse in situations where they compete simply because they have the Lotus name.

But perhaps the biggest question looming over groupware is one high-tech companies always struggle to answer: Is the company leading the charge into new markets likely to be the first to get arrows in its back? Lotus also appeared to misplace bets on IBM's disappointing OS/2 operating system, causing many partners to develop applications for an operating system with limited market share. Lotus has at least a five-year lead on competitors, building up a network of resellers and 1.5 million users. But that has also given competitors such as Microsoft Corp., Novell Inc. and Oracle Corp., time to learn from Lotus' mistakes, which some say include a system that is overly complex and far too expensive.

All three are developing products in the next year that will rival Notes, which has more than 1.5 million users. Lotus, understandably, wants them to develop complementary products that work with Notes, rather than trying to displace it. Oracle, for one, seeks to exploit the capabilities and corporate popularity of the World Wide Web with its groupware products, which it will release during the first quarter of 1996. Microsoft hopes to leverage its success in software application, networking and operating systems with its Exchange, which it plans to release in early 1996. Novell is developing a groupware suite for Microsoft's Windows 95.