What does it all mean?

August 28 2005

While I was taking a few days off last week, there was a lot of talk in the Lotus-related blogosphere and community about market share.  Both Gartner and IDC published their 2004 share reports for the messaging/ICE (integrated collaborative environment) markets almost two months ago.  For whatever reason, last week's cite of these numbers got more attention than the reports did themselves.  I don't want to focus on that article -- other blogs have dissected it.  I do want to talk about market share and what it all means.

It's important to understand that most of what's said here is thought I've shared elsewhere over the last several years.  Some of what I'll write will necessarily sound defensive. But I think that there's a lot of good news at the moment, and I want to make sure that we keep that in perspective as well.

First, don't lose sight of the bottom line.  According to Gartner, for 2004, IBM commands an impressive 45% of the e-mail market. [Note that this number wasn't cited in the article referenced above].  IDC's number is a bit lower.  Either way, the corporate e-mail/ICE market is now entirely a duopoly -- with Novell, Oracle, and Bob's e-mail server fighting it out for less than 10% of the market.

I want to respect the copyright and hard work of both Gartner and IDC, and thus, not go on to spew all the contents of their respective market reports.  What is important to note is that looking at one number taken from those reports doesn't necessarily tell the whole story -- who is growing (hint: it's not just one vendor), who has potential to grow further, who leads in particular regions.  Whichever of these analysts you work with, go get their reports.  It's interesting to note that no analyst from either firm was quoted in any of the recent articles highlighting their reports -- I suspect they'd offer the same texture that the reports themselves do.

Remember that these numbers are for 2004.  We're done with eight months of 2005 already.  In the two publicly-reported quarters of 2005, IBM has indicated growth in the Notes/Domino business.  IDC published a fantastic report just a few weeks ago which highlights why they believe IBM is now gaining share in this very same market.  

Second, let's talk about what market share really means in this market.  Remember, I have made these same points for the last few years, whether someone said Lotus was #1 or #2 or whatever in this market.  Share is difficult to measure in software, especially in e-mail. Why?  This isn't like toothpaste or automobiles or even server hardware, where someone can physically count every unit sold.  That's why for almost all software markets, IDC and Gartner measure annual vendor revenue.  There's no way to accurately adjust these numbers for "shelfware."  That's a problem in e-mail, because a very common way for customers to acquire the right to use Microsoft Exchange Server is through Microsoft's Enterprise Agreement (EA) "Core CAL" bundle.  The Core CAL includes the right to use Windows, Exchange, SharePoint, and SMS.  Don't want all of those?  Well, that's the bundle available in the EA, and through it, customers appear to sometimes buy something they don't need in order to buy something they do.  IBM offers bundles that include Notes/Domino (called CEO or ELA licenses), but with a lot of flexibility to include or exclude those or other products.  The shelfware equation is simply different between the two products.  Thus, revenue isn't a perfect picture for this market.  When the shoe was on the other foot, one Microsoft employee used to include this line in his pitch to MS partners -- "Yes, IBM is #1 in e-mail by revenue, proving that they are the best at overcharging customers for it".  I wonder what he'd say now.

Last, a first-time shift in rankings doesn't mean the end of a product line.  If there were other data points that indicated the product in question was entering decline, there would be cause for concern.  Let's be clear -- Notes/Domino is hardly on the decline. Data, not conjecture, follows:

  • At Lotusphere 2005, IBM announced 1468 new customers for Notes/Domino during 2004.
  • In the last three fiscal quarters, IBM has announced double-digit revenue growth for Notes/Domino.
  • Over 80% of all Notes/Domino customers are running Notes/Domino 6.x, the most successful upgrade cycle of the modern (post-R3) Notes product lifecycle.  By comparison, Steve Ballmer was quoted coming out of MS's partner conference as saying that only 15% of Office customers have upgraded to Office 2003, which shipped about the same timeframe.
  • Respected industry analysts like IDC, Gartner, Burton, Redmonk, and Forrester have all published positive reports about Notes/Domino 7, and the next release of Notes ("Hannover"), during 2005.
  • In the next few days, IBM will launch Notes/Domino 7, the best release of the product ever.  The release is coming on-time (some say that IBM is even early vs. expectations), and a multi-million US dollar worldwide launch will ensue.
Some of you have cited other data points.  Business partners, both small and large, have reported growth and renewed interest in their products and offerings.  Analysis of job postings on sites like UK Jobserve shows a constant and steady demand for Notes jobs.

As was noted several times while I was in Dublin the last few days, we're about to enter a very busy and exciting time for Notes/Domino.  There are customers planning upgrades to "7" almost immediately upon release, and SearchDomino says 63% plan to upgrade by end of 2006.  What happened last week wasn't a tectonic shift, red alert, end of the race, or any of those other metaphors.  Microsoft has been gunning for Notes customers ("ripe for the plucking", remember?) throughout 2005, and I think we can expect this to continue.  I cannot give you a list of customers who have migrated to MS this year, though -- for all the fire and brimstone, the number of losses I'm aware of is extremely small.

So, with all of this, I'm not taking my toys and going home.  There are over 100 Notes/Domino 7 launch events scheduled in the next 75 days.  I can't attend too many in person, but you'll see executive commitment from IBM at the vast majority of them.  The product rocks, the roadmap is clear, and for all the noise coming out of Redmond, ultimately they have a pile o' 16 products that somehow try to compete with Domino.  I'll keep my bet on yellow, and can't wait to see what we are talking about this time next year.

Ed Brill | AA93, DUB-ORD, Seat 10G Category:  Messaging  Add/View Comments [24]

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  1. 1  Darren http://www.dadams.co.uk | 8/28/2005 6:12:06 PM

    Just because Microsoft appear to be #1 right now, does that mean that the customers who have selected their solution are getting more value from it than IBM's solution?

    I would like e-mail customers world-wide to consider this question... what would the messaging and collaboration market look like if Domino was a Microsoft product and Exchange was IBM's product? Microsoft capture the customer mind-set enough to get away with selling something less scalable, less secure, less resilient, and with an uncertain roadmap. Would IBM be afforded that position?

    Think of two customers in the same industry - one opts for the supposed market leader, the other goes with a solution that allows them to run 24 x 7 and deploy collaborative applications that further their business while reducing costs. Which of the two will succeed in their market place?

    Bottom line... it's not who's #1 that matters - it's who provides more value. That's what sorts out the winners from the losers.

  1. 2  Ethann Castell ethann.caliton.com | 8/28/2005 8:13:25 PM

    The title of your posting got me very excited but then I found out it was ONLY about market share. sigh... I guess I'll have to stick with "42" for the time being.

    I've been trying to get a handle on where Notes/Domino is at, for quite a while. I think that the 1997-2001 period is still in the back of many people's minds. (Why didn't someone tell me it wasn't going to last forever ?) So that feeling that "things aren't as good as they were" may linger on for a while longer. Added to this has been the FUD factor, which IBM has to take some of the responsibility for.

    The really important numbers are really based around what is going to happen in the future. How many new customer will buy Notes/Domino ? How many exisitng users will keep using Notes/Domino and how many will upgrade ? How much will these companies spend on NEW development projects ? To figure out these numbers you would need a pretty good crystal ball.

    Another interesting number is the number of developers. I personally know of many developers who have left Notes behind and moved into other areas. Renewed interested in Notes may create more job opportunities but will this result is a shortage of Notes developers ? And if there is a shortage, then is this a negative factor for companies looking to purchase Notes ?

  1. 3  Calvin Hovowe  | 8/28/2005 8:27:19 PM

    I am a bit concerned that you are blind to what is really going on. At least in my industry, Legal, Notes has gone from a 35% share five years ago to 6% - info can be found in here:

    { Link }

    I was just at a LegalTech conference this past week and found out that one of the Big 10 Firms that uses Notes (we stick together) is switching to Exchange in the fourth quarter. The reasons:

    (a) All third-party products integrate better and faster with Exchange.

    (b) We wasted a lot of money on prior Lotus KM solutions (remember Raven, Learningspace), and have been wiped out and CONFUSED by Websphere\Workplace\RichClients, etc.

    (c) Where's the beef? Lotus has been talking for years (since Ambuj) about what's next, and NOTHING has yet to be delivered.

    (d) Notes 7 - sorry, offering me DB2 isnt the answer to simplify our lives (if so, why is everyone moving to Exchange).

    Can't remember what else, though it really concerned me, as when an industry becomes a lost cause, it will be impossible for me to get support and innovation that we need.

    So related to market share, open your eyes please. Quoting what Ambuj said about share and new customers at Lotusphere isn't exactly being "clear". Stop defending and fight.

  1. 4  Ed Brill www.edbrill.com | 8/29/2005 2:42:39 AM

    @3 interestingly, I read a couple of e-mails with very similar comments/concerns on my flight back yesterday. I haven't had a chance to comment on the specific situation in legal.

    I'm not quoting Ambuj with that 1468 number -- it's more that we both are quoting IBM's sales tracking system. Saying that I'm quoting Ambuj seems to imply that you don't believe the number -- that's your choice but it's real. Same with share numbers -- why is it unclear to quote the worldwide numbers?

    On the other points:

    a) Let's take RIM/Blackberry as an example. They did integrate with Exchange first, but now they integrate better with Domino. BES/Exchange need a 1:1 server ratio, while BES/Domino can be 1:many. There are plenty that build first or simultaneously for Domino.

    b) There has been confusion in the past, I don't disagree. I don't think it's anywhere near the same level today as it was 12-18 months ago. In the last six months, I've talked directly to hundreds of Notes/Domino shops to get feedback on this.

    c) Nothing delivered? { Link }

    d) DB2 isn't the primary feature of ND7.

    At any rate, it's not like we're not fighting. I don't discuss sales strategy on the blog, not really a good idea. But there has been a ton of activity all year and a lot more coming in the next 60+ days around Notes/Domino 7 launch.

    I'd be interested in finding out more about the legal situation -- I'll take another look at the e-mails I've received. It's not in my interests to be "blind", but I do see the market with a much broader lens.

  1. 5  Subhan http://slate.blogspirit.com | 8/29/2005 5:01:13 AM

    Does this topic/figures also includes IBM Workplace offerings?

    If yes then,

    - can we have some easy to access Implementation Case Studies on them. The Workplace Main site is not easy to find thru IBM.com and no links for case studies. { Link }

    - Adoption of these offerings by developers is another growth factor that shouldn't be ignored. My personal expr. from the part of the world I come from, is that these offerings have way to demanding Hardware requirements which can be a hinderance.

  1. 6  Calvin Hovowe  | 8/29/2005 8:08:33 AM

    Thanks for the detailed response Ed.

    Blackberry\RIM has definately made strides in integrating with Notes better, and much quicker. No more 6+ month lag there. Though this is the cream of the crop (the best case scenario) when it comes to integration.

    On Workplace, I am not sure what that means to me. We use Notes (6.5) for email on a few thousand seats. Not sure where or how Workplace fits into my/any firm? Is it a competitor to Sharepoint? Does it want my Intranet? I am a Notes "guru" and have attended 10 Lotusphere, and I just can't get my arms (mind) around it (yet). We have Webpshere Portal (on the shelf), should I use it to help with that?

  1. 7  Paul Robichaux http://www.e2ksecurity.com | 8/29/2005 8:51:28 AM

    @4: no, BES on Exchange doesn't have to be 1:1 (in fact, none of the sites I work with have anything approaching 1:1).

  1. 8  Ed Brill www.edbrill.com | 8/29/2005 8:56:10 AM

    @7 hmmm. I've been told that by several people at both Blackberry and some of our mutual partners. I'll have to dig a bit more, don't want to be inaccurate on that.

  1. 9  Ed Brill www.edbrill.com | 8/29/2005 9:02:31 AM

    @5 - Well, I don't think this was meant to be a Workplace discussion... but the references for Workplace can be accessed at { Link }

    I'm not sure why you think Workplace is hard to find through ibm.com. from ibm.com/software, there is a Workplace link under "technologies". the direct is ibm.com/software/workplace . Seems straightforward to me.

  1. 10  Eric Parsons startingblockcomputing.com | 8/29/2005 10:35:47 AM

    I fully agree with your "shelfware" point. For a client that I worked for, I'm sure the 3,000 or so Notes CAL's were counted the same as the 4,000 or so Exchange CAL's. (The ELA with M$ was for desktops, and there were about a 1,000 desktops that did not need email or application accounts.)

    The main enterprise has ZERO Exchange servers, although they were licensed "for free." A subsection of the enterprise uses Exchange, and it was rumored that one out of four messages were never delivered. Call that a bad admin, or just Exchange.

  1. 11  Mark Hughes  | 8/29/2005 11:20:01 AM

    When the Cingular Blackberry Installation guy came to install Bes on Domino, he showed me the size difference in the installation manuals for Domino and Exchange. The difference was remarkable, the Domino guide was less than half the size of the Exchange installatin guide, and according to the rep, it was alot easier to install as well

  1. 12  david racicot  | 8/29/2005 1:40:25 PM

    David’s draft News Release

    The IT community is anxious awaiting this fall’s release of IBM/Lotus’s flagship product Lotus Notes/Domino R7.

    Lotus has already seen double digit growth and the migration of nearly 1500 competitor clients to its R6 version over the past 8-12 months. This is a significant turnaround from a year ago where market share reports showed a slight decline in Lotus’s email market share. These reports are likely the tail end of fallout from market confusion generated 2003/2004 when IBM began promoting its Websphere product line. Indeed, with the message clarified, Lotus has rebounded strongly to erode its main email competitor’s (MS Exchange) market. It will likely do so at an accelerated pace as it continues to innovate and deliver while its competitors struggle to enable their own customers to migrate to the latest versions of their email only products. In fact, many MS customers are likely breathing a sign of relief as they now how a solid platform to go to, and one that works on Linux also, to work with their Linux server migration projects.

    Over the next several years Lotus Notes coupled with Linux and DB2 will increasingly draw corporate business away from the less open, troubled and more costly Microsoft product line and will allow them to reduce their cost of licensing, operations and ownership. This is also true from the SMB market through the Express offerings of these products.

    It’s going to be a busy time for Lotus and Lotus professionals.

  1. 13  Chris Whisonant http://cwhisonant.blogspot.com | 8/29/2005 1:48:04 PM

    I will say that BES for Domino is pretty straightforward. I understand that the load put on the Mail server is remarkably different between Exchange and Domino. BES puts a 1:1 hit on the Domino server and a 5:1 hit on the Exchange server. Meaning that for every BES user it can equal 5 additional Exchange users. This was some information I got from RIM at some point...

    Anyway, I'm looking forward to putting ND7 on my failover iSeries cluster and hopefully rolling it out to my other servers and clients.

    Ed, there are a couple of things I haven't seen addressed, though (these aren't biggies or complaints, just general questions):

    1 - Will we have to wait on Sametime 7.0 to upgrade Domino servers running Sametime 6.5.1? Any timeframe on Sametime 7.0?

    2 - We (the customers) have been told that DWA 7.0 will have folder unread marks. I've heard this at the past 2 (maybe 3) Lotuspheres that Lotus wants to add this feature. From testing on a Linux 7.0 Beta 4 box, folder unread marks are not showing up. Is this a Linux thing or is it not implemented yet?

    Looking forward to the release!!

  1. 14  Ed Brill www.edbrill.com | 8/29/2005 2:55:28 PM

    @13 Chris -

    Sametime 7.0 will ship simultaneously with Notes/Domino 7. (The same is true for Quickplace and Domino Document Manager).

    I don't know anything about the status of folder unread marks for DWA 7.0. let me see if I can find out.

  1. 15  Chris Whisonant http://cwhisonant.blogspot.com | 8/29/2005 3:02:04 PM

    @14 - Great to hear about Sametime (also great to hear it referred to as Sametime!) Thanks!

  1. 16  Removed  | 8/29/2005 3:11:06 PM

    Comment removed at poster's request.

  1. 17  Ed Brill www.edbrill.com | 8/29/2005 3:34:48 PM

    @16 "stop development of the Notes and Domino core" ??? When was this? I must have been asleep. 6.0 and 6.5 have both shipped since Workplace was first announced (before it was branded).

    By the way as to Calvin Hovowe's original comments, I've read that survey and it's a bit sobering. However, a couple of points:

    1) Law firms represented in it are mostly very small businesses -- <75 users. As such, MS's SBS (small business server) is an easy choice in that segment. Domino's Express offering competes there but the messaging-only version is recent.

    2) It's a US-only survey.

    To drop one percent year-to-year doesn't alarm me in and of itself. The lack of general presence in US legal does, though, and is the subject of some internal discussion.

  1. 18  Removed  | 8/29/2005 5:20:31 PM

    Comment removed at poster's request

  1. 19  Calvin Hovowe  | 8/29/2005 7:16:12 PM

    Ed, I should have highlighted that that study (and the journal it is from) is targeted at smaller law firms -- around 100 attorneys, which is usually about 400 employees or seats.

    The AmLaw 100 (largest Firms) average 1000+ seats, with the top 10 just under $1billion in revenue and 5,000 seats each. And the Lotus share is somewhat better at the larger firms, however it is about 20% max. Being a knowledge industry, it just seems perfect for Notes.

    At last weeks ITLA conference Microsoft ran 2 session tracks of 10. In years past they killed WordPerfect and have vowed to do the same to Notes. Sharepoint is taking off at firms.

    Where is Lotus? Where is "Workplace Legal"? Quickplace would be great for deal rooms, though there is no "Quickplace for law firms". Sametime is the only encrypted IM. It would be so easy... :)

    The problem is - firms occasionally leave Notes and migrate to Exchange, though I have never seen a law firm do the opposite. Here is hoping you change that.

  1. 20  Ed Brill www.edbrill.com | 8/29/2005 9:29:09 PM

    @19 cheers to that last thought. I do think it's important that the casual reader of this blog thread understand that there are something like a half million law firms in the US, so a survey of 486 may not represent the entire spectrum. Still, it is an industry where there no longer seems to be enough Notes presence. As I said in my first reply, I've flagged this blog thread for some of my IBM colleagues and asked what is/can be done.

  1. 21  Mike Brown  | 8/30/2005 4:26:17 AM

    @18. Partial workaround (and I stress "partial" here): if you know the first letter of your function/sub, you can hit that letter on your keyboard and it will jump to the first function starting with that letter. Keep hitting that letter and Designer will cycle through all functions that start with it. Eventually, you'll get to the one you want.

  1. 22  Ed Brill www.edbrill.com | 8/30/2005 1:56:23 PM

    @13 the unread count on DWA folders dropped from 7.0 due to performance impact.

  1. 23  Rob Novak www.lotusdigerati.com | 8/30/2005 5:57:24 PM

    @19-Calvin

    I will build (and twice have built) either one - "Workplace Legal" or "QuickPlace Legal". But as a vertical product offering, now that's a bit of a problem. One legal department or law firm's view of what it should be, what features it should have, how security is enforced, etc. is going to be quite different from another's. That's why Lotus is in the business of delivering products that are full-blown, out of the box working products AND development platforms. They can't afford to try to do a vertical Legal solution and support the variation in the industry's needs at the core product.

    QuickPlace is great for web-based collaboration, lightweight workflow, and rapid forms generation, for instance. But add some development and you can have an awesome, rock-solid application for trademark research and brand approvals. Or for global auditing, or for military construction tracking, accounting standards compliance, employee trip reports and vacation requests, marketing innovation campaigns, certification exam development, software downloads, network outage alerts, or any of the other hundreds of applications and variant use cases for which it's been deployed. Workplace will become yet another platform like this - with even more extension and broader reach.

    I love developing high end solutions for these platforms, because in most cases 50% or more of the work has been done for me - hence making a development effort more economical for my clients. Going vertical has been a challenge because of the lack of standardization in any one industry's collaboration needs. But if you have an idea for something that would be both vertical to the Legal industry and commercially viable, please let me know. I would be happy to collaborate with you on it!

  1. 24  Ed Brill www.edbrill.com | 8/30/2005 6:47:08 PM

    @23 Rob - thanks for that great response!