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Online Extra: Mills: Microsoft Is Just "Saber-Rattling"


IBM (IBM) has locked horns with Microsoft (MSFT) over everything from operating systems to database software to e-mail programs. In recent years, IBM has backed the uprising of the Linux operating system, pushing the community-built software while Microsoft pours hundreds of millions of dollars into developing its next version of Windows, code-named Longhorn. Now, the two tech titans find themselves competing again, this time in the hottest new markets for collaboration software -- programs that serve up secure instant messages and Web conferencing services.

To this battle, IBM brings two key weapons -- its long-popular collaboration program, Notes, and its new package of applications, Workplace. Notes has long been a way big corporations help workers create virtual workspaces for teams to share and modify documents. Launched last year, Workplace lets companies customize employee computing environments, shooting specific programs that workers need right from a computer server to a Web browser on their PC. And since Workplace is browser-based, it can work on Linux as well as Windows.

Steven A. Mills, IBM's executive vice-president for software, recently chatted with BusinessWeek Seattle Bureau Chief Jay Greene about Big Blue's new desktop-software gambit and sized up the competition from Microsoft. Edited excerpts of their conversation follow:

Q: Help me understand IBM's collaboration strategy. Is Notes at the heart of it? Or is it really about Workplace?

A: In order to get some clarity here, you have to turn the clock back a bit and look across a broad landscape of activities. The Notes product was designed and built back in the late 1980s. We bought Lotus in 1995. And clearly Notes, in the era it was created, was leading-edge technology [that's,] frankly, not replicated by anyone else.

You look at huge businesses, like an IBM or a General Motors (GM) or a variety of others, and you'll see an extensive use of Notes as an enterprise-wide communications system and collaboration system for their business. This product dominates this area of the market, not to be confused with e-mail, of which there are a whole variety of e-mail systems, and Notes happens to be one of those e-mail systems. Around simple e-mail and simple scenarios is where we tend to compete with Microsoft.

Q: So what then was the plan behind Workplace?

A: The vision around Workplace was the ability to leverage Web-based standards to do a much better job of integrating seamlessly with production applications. And then we added collaborative functions so that the kind of experience people enjoy within the Notes environment can be translated into other kinds of scenarios.

So it's not about Notes vs. something else. It's about looking forward and saying, "What's the next-generation environment for collaboration?" That's what the Workplace effort has been all about.

Q: Lotus sales have been roughly flat since 2001. How important is Workplace, and this collaboration strategy, in terms of getting that business revved up again?

A: The Notes business is obviously quite heavily penetrated. The market is divided between people doing free e-mail and doing Microsoft's Exchange and doing Notes. And the corporate world is binary. It's either Microsoft, or it's IBM. And that's not a high-growth market.

Where the growth is coming from is the WebSphere portal and Workplace -- the portal offering being part of the Workplace family. We're the market leaders in portals, both in revenue and number of customers. That's been a big play for us.

Needless to say, our game plan here is to be a major player in this next generation, just as we were a major player in the last generation. One then extrapolates from that: This is a very big opportunity for IBM because we were the biggest beneficiary of the last wave in business, and we want to be the biggest beneficiary in the next wave in business.

Q: If you look at the next wave, how significant of a shift is it?

A: It has potential for dramatic shifts to occur. And the reason is that businesses have reached an inflection point. First of all, you have the age of their existing desktops. That puts the desktop model up for reconsideration by companies. They're looking at labor costs becoming the overwhelmingly dominant expense for them in the setting up and management and maintaining of desktops.

It's not about the cost of the PC. It's about the cost of setting up and managing this, when you think about patch management and virus control. You think about user training and user productivity. There's a lot of money to [be] mined in going after those opportunities.

Q: How much has IBM invested in developing Workplace?

A: The sum total of the technology here that makes up Workplace represents a nice chunk of what we invest every year. It adds up to hundreds of millions of dollars. This is a big play for us. It's where we've moved a lot of our resources.

Q: Both IBM and Microsoft are investing heavily in this area. Does that speak volumes about the future of this market?

A: Clearly, it's critically important to their franchise. Everybody understands that. But there's a fundamental and profound difference between what the two companies are doing. There's no comparison in the breadth and depth of collaboration that we're delivering today vs. Microsoft. Their world is the world of e-mail, not the world of collaboration. They're doing a lot of saber-rattling around collaboration. But the Exchange environment has never delivered anything close to the kind of collaboration that the Notes environment delivers.

Q: Where is Workplace getting most of its traction now -- in Windows environments or with Linux?

A: The traction for Workplace is coming from businesses rethinking their existing Windows desktop environment.

Q: As they roll Workplace out, are they rolling it out on top of Windows?

A: They're rolling it out predominantly on top of Windows. They see it as an alternative to the heavy-weight Office model.

Q: So what they're subbing out then isn't so much Windows but rather Office.

A: Exactly. This is not a Windows vs. Linux discussion. It's really two different models, two different approaches to delivering collaboration function to business.

One approach, I think people are very familiar with. It's the classic heavy, expensive Microsoft desktop environment, with the prospects of having to convert to the latest versions to maintain support. That roadmap is a fairly familiar one to business buyers, and they've been on it for years -- frankly, with mixed reaction to the benefit of it. Costly. Expensive. Lots of fees paid to Microsoft. Heavy patch management. Virus control.

And we're offering the alternative. We're saying, "Wait a minute. There's another way." The model of the other way begins with recognizing that the browser/portal-based approaches have already yielded reduced costs. And that approach can be extended and enriched and made very functional and capable for different classes of work where a pure portal-based approach really isn't appropriate for the type of work because there's more complex collaboration to be done.

We're going to give you all the richness of collaboration that you saw from IBM historically with Notes, translated to the next generation of technology. That's a very powerful message.


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