News & Views presents a Guest Editorial by Ed Brill, from Lotus' Competitive Project Office.

Defining Notes/Domino success
The most typical use of Lotus Notes and Lotus Domino is for corporate e-mail, calendar and scheduling, and shared documents -- a basic definition of groupware today. IDC's definition also includes collaboration through shared databases, threaded discussions, and custom application development. Of course, you will also find Domino used as standalone messaging or in outsourced or hosted environments and other web application environments that do not neatly fit into this definition. So measuring Domino in a single category or definition is no easy task.

Since the software licenses for Notes/Domino are designed to be flexible, it's difficult to categorize sales scientifically. When customers buy a Notes messaging license, are they just using e-mail -- or are they also using document sharing or discussions? Are the 75,000+ Domino servers on the Internet (according to Netcraft) serving mail, Extranet applications, or straight HTML pages? Technology changes have complicated the situation. For example, are users who access Domino through a WAP phone counted separately when they access a Notes desktop?

Competitors in various categories, too
Most technologists view Domino's primary competition as being Microsoft Exchange, even though few Microsoft customers seem to use Exchange for more than e-mail and calendaring. Other competitors could include Novell Groupwise, Fujitsu Teamware, and several regional players. Some product guides also position Domino in the same arena as Sun ONE Mail and Calendar servers, Samsung Connect, Openwave messaging server, and Critical Path, or broaden the scope to include e-mail only vendors like Sendmail, Bynari, and Mirapoint. With so many competitors, and several applications of their technology, deciding who is "#1" is no easy effort.

The task is made more difficult by trying to determine an appropriate metric to measure the market. In the past, the industry was enthralled at the "seats war", primarily between Lotus and Microsoft. While it may have been enjoyable to watch, measuring the market through seats was artificial. Unit counts are easy for toothpaste, but a lot harder for software. As far back as late 1998, Lotus' Mike Zisman questioned the utility of this metric. Subsequently, Lotus changed our business model away from seats and towards revenue and profitability. These are the standard measures of success applied to virtually any business.

Then there's Microsoft . . .
Our competitors, such as Microsoft and Novell, seem to have gone in the opposite direction. Ironically, after Lotus stopped focusing on Notes seat counts, Microsoft turned in their largest single-year claim ever. Since analysts like IDC have reported that the growth rate in "integrated collaborative environments" is slower than in years past, it seemed quite surprising to us that Microsoft would make such a claim. Lotus' analysis of public Microsoft statements and documents shows that there now are so many different ways that Microsoft can claim an Exchange "seat", the metric is clearly no longer relevant.

First, Microsoft's new Enterprise Agreement 6.0 licensing program bundles the client access licenses (CALs) for Microsoft Windows, Exchange, and SharePoint into a single "Core CAL"; its predecessor, the BackOffice license, was a similar bundle. Microsoft reports only the number of "Core CAL"/BackOffice licenses sold, not how many were sold to customers already licensed for Exchange, nor do they report how many were activated for use vs. "shelfware". Second, the Exchange 2000 CAL is used both for Exchange server and for Exchange Conferencing Server, and Microsoft does not distinguish between these. Finally, Microsoft has expended considerable energy creating a market, often targeted outside the corporate realm, selling service provider licenses around Exchange for hosted e-mail -- where they are competing more with the likes of Sun and Critical Path than with Lotus Domino. Yet Microsoft's 2001 seats claims include these hosted seats, including consumer market installations of multi-millions of users.

With all those different ways that Microsoft can claim sale of an Exchange license, it's obvious that Microsoft is alone fighting the "seats war" in a market that has moved on. Wouldn't it be great if instead, Microsoft helped the market understand how they are really faring competitively? Given that analysts like Gartner believe the adoption rate of Exchange 2000 to be only 5%¹, I doubt Microsoft will want to provide a more accurate with picture of their customer profile anytime soon.

Lotus Domino is #1
Through the 12 years that Domino and Notes have been available, various vendors and methodologies have been used to report market share, with mixed results.

		Some reports survey 50 or 100 organizations, and attempt to extrapolate the entire market from such a small sample size. It's an admirable attempt, but misses the complexity of a worldwide, horizontal market. Other reports are still counting seats, which really no longer makes sense. There are also reports that attempt to measure revenue. Recently, IDC issued their annual report on the "Integrated Collaborative Environment" market.
Source: IDC's "Worldwide integrated Collaborartive Environments, Forecests, and Analysis, 2002- 2006

As mentioned above, this is one of several markets in which Domino, or our competitors, are measured. It's not a perfect segmentation of the market, but it is the most appropriate to consider Domino (though, perhaps, maybe not some of the other competitors mentioned above).

IDC's independent report highlights Lotus' consistent performance in this market, a strength that reaffirms our continuing investment and commitment. In the July 2002 report, which measures the market as of end of 2001, Lotus continues to hold the #1 revenue position in the ICE market, with $804 million in revenue, or 49%. Our nearest competitor, Microsoft, is ten points behind, at only 39% of the market. Lotus' revenue share of the overall market grew by 1% year to year in a market that is shrinking. Some of that growth is attributable to customers moving away from other products; the success of Lotus' Move2Lotus campaign is a key factor in that growth.

Examining the IDC report finds other interesting data. Despite their seats numbers, IDC reports that Microsoft and Novell have lower revenue than IBM. What does that mean? It means two things. First, this provides independent confirmation that Lotus' Notes/Domino product line is focused providing value for the enterprise needs of corporate customers. Second, it provides a backdrop for some challenging questions as to what defines a "seat" sold. The CAL for Microsoft Exchange 2000 retails for US$67 per corporate user; Novell sells Groupwise at US$130 per user. Check the math -- if Microsoft or Novell sold as many seats as they reported, the revenue reported would necessarily be much different.

Commitment
The question behind the question of market share is really "should I [continue to] invest in this solution?" The IDC market report should help Lotus' current and potential customers answer affirmatively. The strength of the market, and Lotus' #1 revenue position, demands and therefore receives Lotus' commitment to Notes and Domino. As Lotus' Jeanette Horan stated, "Domino's yellow brick road continues as far as the eyes can see". With Notes/Domino 6 on the near-horizon, Lotus' customers can expect their investment to continue to pay off well into the foreseeable future. This is also an opportune time for Microsoft Exchange customers, as they struggle with questions about where Microsoft is going with Exchange, to consider Domino's payoff as well. Our Move2Lotus program is the fastest way to move to Domino's high value, low operating-cost, market-leading solution.

For more on Domino 6: Visit http://www.lotus.com/domino6
For more on Move2Lotus: http://www.lotus.com/migration

¹ Source: Computer Reseller News, April 26, 2002: "E-mail convulsions ahead" quote from Joyce Graff of Gartner