Analyst: IBM needs to 'out-innovate' with Notes

IBM is betting on SaaS (software-as-a-service) to take its Lotus suite of products to new growth, but analysts think Microsoft's foothold in the market will be difficult to unwedge.

John Mullins, Lotus Asean business unit executive at IBM's software group, said cloud will be the company's "game changer", allowing its customers to reach out to underserved segments of employees who do not have e-mail capabilities.

Big Blue hopes this would appeal especially to customers in emerging markets, where the cloud's elastic provisioning will allow companies to "quickly" offer e-mail capabilities without having to host the new additions themselves, Mullins explained in an interview with ZDNet Asia.

The SaaS version of its e-mail collaboration product, dubbed Lotus Live, was launched earlier this year. "The cloud is leveling the market, and the battle is just beginning," he said, referring to competition against rival Microsoft in the small and midsize business (SMB) market.

Rob Koplowitz, Forrester Research's principal analyst, concurred on the value proposition of cloud computing to emerging markets, but added that toppling the Microsoft SharePoint juggernaut will require more innovation from IBM.

"IBM should place its bets on emerging markets to open up the playing field," Koplowitz said in a phone interview. "[Lotus Live] will win IBM some deals, but I don't think any of [its new features] will stop SharePoint in its tracks, however."

Sharing preliminary numbers from a recent Forrester survey that polled 1,000 U.S. and U.K. enterprises, he said Microsoft's Outlook had 81 percent market share of the enterprise e-mail market, with IBM's Lotus taking 13 percent.

Habits are hard to break, he noted, and the popularity of SharePoint means IBM will have to place its bets on trends before they happen.

Koplowitz noted that Big Blue's investment in beefing up Lotus' social aspects over the last few years has paid off, and pointed to the company's successful bet on the social computing trend taking off in the enterprise space. "The social aspects definitely won companies that were eyeing these functions, and that did not already have Microsoft installed," he said.

"IBM has to out-innovate Microsoft," he added.

Closing SharePoint gap
Steve Hodgkinson, research director at Ovum, said Lotus Notes lost its early lead in the groupware segment because "IBM purchased the company [in 1995] and then didn't really know what to do with it".

"They took too long to [craft] new strategies for collaboration and office productivity applications, and many enterprises deferred Notes upgrades while they waited for IBM to get its act together," he noted.

This allowed Microsoft to "steam ahead", he said, along with the company's added advantage from its presence in the consumer market and user familiarity with its products in this sector. "Enterprise executives had experience with Microsoft products in their personal lives and became very frustrated with their outdated Notes products at work," Hodgkinson said.

Koplowitz said: "The old Lotus Notes experience lasted way too long. It wasn't till version 8 that you saw an [up to date] user interface (UI). Clients have said [their] users want Microsoft Outlook because it's easier to use. It sounds frivolous to change e-mail deployments just because users didn't like the UI, but [this trend] was happening."

The analysts agreed, however, that Lotus' facelift has closed the usability gap with the competition.

Koplowitz said: "Lotus can now go side-by-side with Microsoft in a UI bake-off."

Hodgkinson added that the latest Microsoft and IBM product suites are "functionally comparable".

But, converting existing Microsoft customers over to Lotus will be a challenge, he said.

"There is no significant difference between the two platforms that would make it worthwhile, from a business value point of view, for a large enterprise to switch from one to the other.

"Any enterprise is better advised to leverage its existing investments in the platforms it already has, rather than being sucked into marketing hype about one being better than the other," Hodgkinson noted.

Regardless, both Microsoft and IBM are growing their respective customer lists, he said.

Koplowitz said: "Lotus is doing well in emerging markets, [but] against the backdrop of Sharepoint, which is wildly successful."

IBM's next good bet may prove to be its focus on video for the Lotus Live platform, he said.

IBM's Mullins said the company has built features into Lotus Live that are typically found in desktop offerings, to make its SaaS product competitive. This includes video conferencing, as well as directory integration, he said.

The IBMer admitted the company has been slower to the cloud game, but is confident of its pull in the enterprise segment.

"Yes, there were forerunners before us, and we're reacting to market demand for the cloud," he said, but added that "consumer services" from competitors such as Google Apps "are not relevant to provide enterprise-grade security and uptime".