Oh, Domino! Why Lotus is dropping the ball

When IBM acquired Lotus Development Corp. after a contentious struggle eight years ago, Big Blue proclaimed that its new subsidiary would be a linchpin of IBM's desktop strategy. Yet the Notes/Domino jewel that IBM acquired stands today at an awkward crossroads. Its market share is stagnant, and IBM's seeming disinterest during the past few years in challenging Microsoft Exchange has made users nervous.

True, things have been looking up lately. Domino 6, which shipped about a year ago, has gotten much better reviews than its buggy predecessor. IBM's new Lotus Workplace Messaging initiative, combined with the release of an improved Notes 6.5 client and a new push toward small and midsized businesses are all good news. IBM appears to be returning to Notes' roots by promoting it as a tool for collaborative computing. Let's hope that continues.

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But there's a lot of ground to be made up. IBM went three years between major releases of Domino -- a long time, even by enterprise software standards -- and at times seemed more preoccupied with pushing sales of its WebSphere application server on Domino users than on improving their core platform. At times, it looked like IBM had almost forgotten about Domino.

Not surprisingly, users are concerned. Ask Notes developers and administrators for their opinions, and you'll hear the same theme over and over: They love Notes/Domino, but they're nervous about the product's future -- and annoyed, if not downright furious, about IBM's recent marketing and positioning.

In a recent unscientific SearchDomino.com poll that asked members what one change they would make to Domino, users chose "boost Domino marketing" two to one over "fix Domino bugs." The message: The product is good but the positioning is not.

There's reason to gripe. Notes built a multi-year lead over all its competition in the 1980s, but IBM allowed the Lotus unit to stand still while it wrestled with integration and strategic issues. IBM said early on that it wouldn't mess too much with the Lotus organization. Since then, however, there have been massive layoffs in the Lotus corporate headquarters. Key marketing and management functions have moved from Cambridge, Mass., to IBM's New York offices. IBM announced plans to standardize Notes on IBM's WebSphere and DB2 back ends and began pushing customers aggressively to follow suit. Additionally, the last two people picked to head Lotus have been IBM lifers.

Meanwhile, Microsoft Exchange has methodically overtaken Notes as the market share leader, using Microsoft's trademark tactics: persistence, a better user interface and allegedly superior integration with the operating system. While Exchange still trails Domino in overall market share, it's headed in the right direction. According to International Data Corp., Domino's dollar share has slipped from 49% in 2001 to 46.2% today. Meanwhile, Microsoft has grown share from 38% to more than 44% in the same period.

Microsoft exceeds expectations

The buzz over Microsoft's forthcoming Exchange 2003 launch has exceeded the anticipation over last year's Domino 6 launch and the introduction of the much-improved Notes client early this year. Apparently, Microsoft will soon support -- gasp! -- instant messaging through Exchange. Hmmm. Seems to me Notes/Domino had that feature at least two years ago. Other than that, there appear to be no significant architectural changes to the new Exchange.

Microsoft has dragged out all the usual incentives for customers to switch: the Active Directory integration, compliance with Microsoft .NET, a superior user interface and, perhaps most frustratingly, the questions about Domino's future. But IBM has plenty to crow about, too. There's Domino's compliance with de facto industry standards like Java and XML, cross-platform compatibility and superior programmability. You can scale it with fewer servers. It's reliable and secure. And the market power of IBM should also count for something.

But despite all of Domino's fine attributes, there's a distinct unease in the user community. While 78% of respondents to SearchDomino.com's survey said they were positive about the platform, the verbatim responses were disturbing. "I am very concerned with the poor marketing efforts on Domino," said one respondent, in a frequent refrain. "It is not aggressive against competitors, and there is far too much push for WebSphere."

That Domino will remain a force in the market for a long time is not in question. E-mail is an obscenely profitable product, and it's painful for customers to switch platforms. IBM can milk the Domino installed base for a long time if it chooses to. But why do that? Domino users are among the most fiercely loyal in the IBM user community, and messaging is a hotbed of activity. Instant messaging use is expected to explode in coming years. New government regulations will make e-mail a focus of considerable corporate investment for tracking and archiving. And I don't think we've even begun to tap the potential of electronic collaboration.

With all that's happening, Notes/Domino should be a core strategic platform for IBM. Domino may not be the linchpin of a desktop strategy any more, but it is key to the more immediate initiative to tap and understand the way organizations think.

Paul Gillin is the vice president of editorial at TechTarget.

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