August 2, 2005 8:26 AM PDT

IBM targets Microsoft's suite spot

Once mired in a stagnant market, IBM's Lotus division will use industry standards to loosen Microsoft's grip on desktop software, according to the outgoing Lotus general manager.

The Lotus division, which includes IBM's Notes, WebSphere Portal and Workplace products, turned in a 17 percent year-over-year revenue increase in the second quarter--the third consecutive quarter of double-digit growth.

That financial performance, highlighted by CEO Samuel Palmisano's quarterly review to employees, demonstrates that IBM's Lotus division has successfully reinvented itself and the market it competes in, Lotus General Manager Ambuj Goyal said last week in an interview with CNET News.com.

"For the first time, Lotus is becoming a jewel in IBM's software crown," said Goyal, who will become general manager of IBM's information management division later this month. He will be succeeded by Michael Rhodin.

In sharp contrast, when Goyal took over at Lotus two and a half years ago, the future did not look so bright.

The division's sales were flat, or decreasing and were leading to layoffs and other cost reductions. There were ongoing questions over whether IBM's purchase of Lotus in 1995 was paying the anticipated dividends.

"We were in the doghouse," Goyal said.

His strategy was to pursue a larger market. Rather than focusing strictly on messaging and collaboration software, Lotus launched the Workplace initiative, a product line that addressed "people productivity" in general.

Now, instead of trying to sell upgrades to messaging software, IBM offers a wider set of portal-based productivity and collaboration tools, Goyal said.

Hot pursuit
IBM's pursuit of the end-user collaboration software market has pushed it into more heated competition with Microsoft. Like IBM, Microsoft is bulking up its Office System product line to incorporate workflow and collaboration tools. The two companies' products--Microsoft Exchange/Outlook and IBM Lotus Domino/Notes--already battle head-to-head in the messaging marketplace.

Microsoft, meanwhile, is quick to dismiss IBM's Lotus division and the company's desktop software initiatives. At Microsoft's partner conference earlier this month, company CEO Steve Ballmer said that the Lotus Notes customer base was "ripe to be plucked" by Microsoft and its partners.

Even though IBM's ambitions in the desktop software arena are not fully known, Goyal counters that customers are responding well to the direction that Lotus has set.

"People who spend the time with us understand and that's why they buy," said Goyal. "I would any day (rather) be better in selling than (in) marketing."

IBM's overall brand of collaboration software is called Workplace, which encompasses a range of "personal productivity" tools, including collaboration tools like instant messaging and Web-based productivity applications for creating text or spreadsheet documents.

In the forthcoming Hannover edition of Notes, IBM will seek to use collaboration tools in the context of a specific task. For example, a person will be able to click on an e-mail related to a specific issue and quickly get access to all correspondences on that topic.

Sticking to standards
The company's strategy is to maintain its current Notes and WebSphere portal customers by offering upgrades while introducing its Workplace suite of standards-based, componentized collaboration tools. The company is also rebuilding its Notes and Domino products around industry standards and IBM's other products, such as its DB2 database.

Last month, IBM acquired PureEdge, which sells tools to build and run forms-based workflow applications. A key reason IBM purchased the company was

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ibm/microsoft
as a user of lotus since only 1-2-3, 48 installation disk and through the 9 suites. i can't understand how lotus/ibm has effectively cut us loyalites off. 2 major upgrades since 98, with one being only to run winxp!
microsoft patterened its office stuff after the office collaborations offered by lotus based upon lotus' users demands. the government was with the lotus grup..lotus was leading the way with the know how, cut us users off, yielded to microsoft.. it rankles me that now, as they prepare to offer up vista, lotus/ibm decides to challenge what was their invention to begin with. i wish lotus/ibm would at least make it possible for lotus users to stay up to date without having to switch.. i have fought so far rather than switch to microsoft office, which in my opinion, is just where lotus was in 1998 and still cannot get it right.
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