For the past seven years, Microsoft and IBM's Lotus Software have been battling fiercely for dominance of the enterprise messaging space.
Heading into 2003, both companies are hyping new or upcoming releases of their core messaging products, Microsoft Exchange Server and Lotus Domino and Notes. But the days of contentious competition between the two vendors are probably over.
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According to David Ferris, president of San Francisco-based messaging research firm Ferris Research, 90% of enterprises have committed to either Exchange or Domino, and once that choice is made, most find it too difficult to reverse course.
Ferris said that's why, after jockeying for position for years, the two companies now dominate the market in terms of overall seat count. According to the most recent research by Framingham, Mass.-based International Data Corp., Microsoft boasts about 83 million Exchange users and Lotus is only about 9 million seats behind. Third-place Novell Inc. ranks a distant third, with 34 million users of its GroupWise offering.
However, Lotus is able to boast that its messaging business is more profitable. IDC said that in 2001, Lotus made more money off Domino than Microsoft did from Exchange, $804 million compared with $646 million. While both vendors claim a dramatically lower total cost of ownership (TCO), experts conclude that neither product has an advantage and that TCO depends on whether Active Directory is considered part of the Microsoft messaging infrastructure.
Over the years, the two products matured and competed fiercely with each other for enterprise messaging market share and mind share. During that time, Microsoft focused on the strength of combining Exchange with its popular Windows operating systems, and Lotus grew Domino into a popular platform for collaborative application development.
Though both products have improved dramatically over time, Ferris said that the improvements have occurred in spite of major mistakes the vendors made along the way.
"With the acquisition of cc:mail [Notes' predecessor], Lotus was the dominant player in the marketplace, but the company managed to destroy that position and confuse customers," said Ferris, by not forging a clear migration path between cc:mail and Notes.
Microsoft has been too eager to release updated versions of Exchange, Ferris said, forcing customers to spend money on upgrades or risk falling behind the technology curve. He also said Microsoft's customer support has suffered to an extent because it has had trouble getting quality employees to work on its legacy software.
Yet Ferris cautioned that even though Lotus and Microsoft have dominated for years, that could change rapidly because the messaging market is known for "massive changes that are hard to predict," most notably customer reactions to product redesigns and licensing changes that shift the balance of power back and forth.
"In the market, there's been a swing predicted toward outsourcing in the medium and large businesses that hasn't happened yet. That would particularly hurt Microsoft's Exchange business," he said. "Oracle is also coming out with a new product, and if that turns out to be really good, then IT shops could find that more attractive."