11/10/97 SUITE REVENGE FOR LOTUS?

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SUITE REVENGE FOR LOTUS?
Java-based productivity programs might give it a shot at revival
It's easy to forget that Lotus Development Corp. helped launch the personal-computer revolution in 1983 by popularizing a new type of program called a spreadsheet. That glory has long since faded, overshadowed by software giant Microsoft Corp., which combined several office programs into one integrated suite and quickly captured the lion's share of the market. So, when the Java programming language and the World Wide Web opened up the possibility of a whole new way of developing and using software, Lotus, now a subsidiary of IBM, saw a chance to get out in front with the new style of network computing.
On Nov. 3, Lotus will make its move when it unveils a set of simplified office programs written in Java that are code-named Kona. Initially, the software will be aimed at regaining some of the ground Lotus lost to Microsoft in the $3.8 billion market for office suites. But further out, Lotus is hoping that Kona will carve out all-new turf as network computing takes off, making it the company's most significant introduction since Notes in 1990, and the most ambitious set of desktop programs yet based on Sun Microsystem Inc.'s Java.
CENTRAL BANK. Kona is a far cry from today's office suites, which have evolved into massive programs with a dizzying array of features that can hog as much as 130 megabytes of a PC's disk space. By contrast, Kona is a lightweight set of eight mini-applications, or ''applets,'' including word processing, a spreadsheet, and E-mail. The software is stored centrally on a computer server, rather than on each individual PC, so the Kona applets are zapped across a network to individuals as they need them. That promises to make software easier to install and update--and could translate into big cost savings for corporations.
Not only is Kona key to the future of Lotus, it's also central to a broader strategy unfolding at Lotus' parent, IBM. Big Blue sees Java, which runs on any kind of computer, as a way to smooth over the differences in its many product lines and to lessen the importance of Microsoft's Windows. What's more, Kona could help jump-start IBM's business in network computers (NCs)--stripped-down alternatives to PCs. IBM's goal is to sell as many NCs as PCs within five years, but the network computer is just an empty box without applets such as Kona. ''Lotus, along with IBM, is betting the farm on Java,'' says Gartner Group Inc. analyst Tom Austin.
Will the gamble pay off? Some corporate customers say Java applets such as Kona are promising. Companies such as Federal Express, Bank of Montreal, and insurer Conseco see Kona as a way to share the latest information with employees no matter where they are located. FedEx, for example, is testing Kona in a system that would let sales reps, whether in Tokyo or New York, work with the same constantly updated info. When FedEx changes its shipping agreements, the modifications can be ''turned on'' instantly by changing the spreadsheet applet on a server, so that every sales rep gets the changes at once. ''This is a much simpler way of running your organization,'' says FedEx Chief Information Officer Dennis Jones.
BUILDING A BASE. That's what Java proponents are banking on. But don't expect IBM to make a lot of money off of these Java applets anytime soon--or eat into Microsoft's market share. The Kona suite of applets will be priced from $25 to $30 per user, vs. $120 to $200 for Lotus' conventional SmartSuite. And Kona could cut into sales of Lotus' SmartSuite. But analysts figure that SmartSuite has slim margins and accounts for just 6% of total suite revenue, so Lotus has little to lose. Not so for Microsoft, which claims 87% of the suite market. ''Microsoft has more to lose,'' says Lotus President Jeffrey Papows. ''We're willing to give up something if we have to.''
For now, Lotus executives say their primary objective is building a customer base as quickly as possible. Making money will come later, especially if the market for network computers reaches more than 75 million users by 2000, as some analysts project. Or maybe not. So far, NCs are still in the tire-kicking stage, and skeptics think companies may be slow to adopt them. Still, Lotus is in the Java game for the long haul. ''The fact that we're part of IBM allows us to live in a world of much higher uncertainty than we could on our own,'' says Michael D. Zisman, Lotus' executive vice-president for strategy. Comebacks never come easy.
By Paul C. Judge in Cambridge, Mass.

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