Office, Beware -- Here Comes Workplace

If it stood on its own, IBM's $15 billion software group would be the world's second-largest software company, trailing only Microsoft (MSFT). Yet, most of the software IBM (IBM) makes runs on powerful server computers, and it figures only minimally in desktop computing. That's about to change.

On Monday, May 10, Big Blue is set to roll out a major new advance in its software strategy -- an integrated group of products called IBM Workplace. The strategy weaves together e-mail, collaboration software, IBM's Web portal, a small database, software for working on Web applications offline, and desktop-productivity applications including word processor, spreadsheet, and presentation manager. It's aimed not at individual consumers but at corporations.

"This is among the most important announcements we have made," says Steve Mills, general manager of IBM's software group. "It really completes a picture for customers. They can see an open platform for end-to-end computing needs."

TIMING IS EVERYTHING. IBM's move sets it up as a threat to Microsoft's hegemony in desktop computing. The Colossus of Redmond offers an array of software for both desktop and server computers -- all based on Windows. In contrast, IBM's package will work with all the major operating systems, including Windows, Linux, Unix, Macintosh, and those for handheld devices such as PalmSource and Symbian. A host of smaller companies already duke it out with Microsoft in desktop computing, but this competitive attack is coming from IBM -- a much more powerful adversary.

IBM has been preparing this initiative for several years, but its timing is superb. That's because Microsoft's next version of Windows, code-named Longhorn, isn't expected to arrive until at least 2006 (see BW Online, 4/19/04, "How Microsoft Is Clipping Longhorn"). And new versions of the Office suite aren't expected until after that. These delays give corporations plenty of time to think about their long-term desktop-computing strategies. Will they stick with Windows and Office, or will they try alternatives?

"We're delivering this here and now. It's 2004, not 2007 or whenever," says Mills. Other companies, including Novell (NOVL) and Red Hat (RHAT), are pushing their versions of Linux hard right now for the same reason: Mighty Microsoft is vulnerable.

OPEN-SOURCE BOOST. With IBM Workplace as an alternative, corporations could decide not to buy any Microsoft software, or at least buy less. "They can use things they run on Windows, but they're not stuck with it," says Mills. For example, a customer could run Linux or Macintosh operating systems on its PCs and laptops, use IBM Workplace as so-called middleware sitting between the operating system and applications, and either tap into its custom applications or into run-the-business applications from SAP (SAP), Siebel Systems (SEBL), and PeopleSoft (PSFT) located on servers.

Or they can use Windows but avoid using Microsoft Office and use Workplace office software instead. With Workplace, "we don't have to pay the full amount for the full Office suite," says Ken Norland, senior vice-president for enterprise collaborative services at home-mortgage giant Countrywide Financial. (CFC) Norland is a heavy user of IBM collaboration products and has been briefed on the new strategy.

IBM's move gives Linux a boost. The open-source operating system has so far caught fire only on servers, but Workplace could make it a viable alternative on desktop and notebook computers. "This is about reinventing the office. Microsoft will have to see this as a real threat," says Amy Wohl, president of Wohl Associates, a tech consulting firm, who was briefed in advance by IBM. Microsoft could not comment on the IBM move because it didn't know the details prior to the May 10 announcement.

MOBILE SWEET SPOT. The IBM strategy isn't aimed at convincing corporations to tear out Microsoft software and replace it with something else. That's too risky a move for all but the most daring chief information officers. Instead, IBM plans on cohabitating with Microsoft on the desktop -- like a cousin from New York moving into your apartment in Seattle. Mills foresees corporations using Workplace as the primary interface that many employees interact with when they're using their computers rather than the Windows interface.

Mills's sweet spot: tens of millions of workers around the globe, including warehouse and factory employees, customer-service representatives, and claims processors who don't need all the bells and whistles in Microsoft Office.

His pitch resonates with companies such as Countrywide, which plans on rolling out parts of the IBM package to its 5,000 mortgage salespeople who work out of their homes. They'll get e-mail, instant messaging, and the ability to tap into corporate databases for information about clients and loans. When they go on the road, they can work on loans even though they're not connected to the network -- then sync up later. "This is a very big deal," says Countrywide's Norland.

SNAZZY SAVINGS. One of the key selling points for Workplace is how it simplifies installation and maintenance of software for corporate technology departments. All the software is downloaded from a server directly to the computers. No need for techies to walk around and load each machine individually as they still do at most corporations. And when a change is made in the software, it's done on the server. Whirlpool (WHR) figures it has saved $1 million on administrative costs in the past year, since it switched to using Web applications based on IBM's portal software.

Workplace also addresses some of the frustrations people have with pure Web applications. When they use a browser to tap into applications on Web sites, they typically have to settle for forms-based interfaces. It's fill-in-the-blank computing. Now, with Workplace, they can create documents, spreadsheets, databases, and presentations within their Web applications -- just like they would with a traditional desktop application.

Another complaint about Web applications: What happens when you're not connected to the Web? Workplace makes it easier for people to do their work whether they're connected or not. That's exciting for tech companies that sell to mobile workers. These people not only can tap into their corporate databases when they're on the road but they can also complete transactions.

For instance, using pieces of IBM technology, contractors working for Arizona homebuilder Amberwood Homes can order materials from their building sites via Palm handhelds. "It's a very big deal. IBM has nailed the mobility architecture of the future," says Todd Bradley, chief executive of palmOne, which has collaborated with IBM on its mobility technologies.

FASTER TURNAROUNDS. IBM has rounded up support from some of the top independent software companies, including Siebel and PeopleSoft. Siebel last year began selling an online version of its customer-relationship-management software. Workplace makes it easier for mobile workers to tap into that, so "We can make our services available on a wider array of devices," says Doug Smith, Siebel's vice-president for architecture.

Workplace makes it possible for mobile workers to get things done a lot quicker. Typically, a salesperson will prepare a presentation and sales pitch for a customer and deliver it during a face-to-face visit. But what if the customer has a different idea of how it can use the product? That might require the salesperson to go back to the head office, do some research, talk to colleagues, and come up with a brand new proposal -- all of which can take days.

Instead, using Workplace, the sales rep could wirelessly tap into product and marketing databases via their laptop computer while in a taxi on the way to the airport using a cellular network or the PCS system that Sprint and some other carriers use. They could continue working even if they lose their network connection, and complete a new proposal before they get on the airplane. Soon as they're connected again, they can quickly zip off the proposal to the customer via wireless e-mail. "This delivers on the promise of sometimes-connected computing," says Monte Zweben, chief executive of Blue Martini (BLUE), maker of sales-optimization software, which is working with IBM on its mobile technologies.

TOUGH TO DIGEST. The price for Workplace seems right. IBM plans on charging from $2 to $4 per user per month, depending on which pieces are used. It's $2 for the basic software, an additional $1 for e-mail and IM, and $1 for desktop-productivity apps (including word processing, spreadspread, and presentation graphics). That's in addition to the cost of the server software, which is where IBM makes its money. IBM also hopes to increase revenues by selling more servers. Workplace is "mindbogglingly cheap," says IBM's Mills.

Yet don't expect IBM to revolutionize the computer industry overnight. Workplace is a complicated package and idea, not easily digested. You can expect corporations to evaluate it and decide whether to buy it or not over the next couple of years. But even then, this could quite possibly slow the Microsoft juggernaut. By Steve Hamm in New York

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