BONUS: Competing with Lotus Notes
In enterprise software the best product doesn’t always win, but the winning product becomes the best product. –An old saying of unknown origin
Welcome to a special subscriber-only bonus post in Hardcore Software building on the previous section on the development of Outlook.
There are many stories that are so deep and cross so many parts of Microsoft that it would not be fair to tell them as part of my personal story of the PC era. I was a participant in competing with Lotus Notes, first as BillG’s technical assistant and then helping with the first Outlook and managing subsequent releases. Competing with Notes was the job of the Exchange email team (called Workgroup Applications at the time). With that in mind, I wanted to offer my personal perspective on the competition.
This story contains lessons in here about competition, technology, and how winning can work in enterprise software even against a brilliant competitor with all of the resources of the largest tech company on the planet.
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In late May 1994 at the Spring COMDEX/Windows World exhibition in Atlanta, Georgia, Bill Gates announced winners of the Windows Pioneers award. The award was recognition of a group of developers and entrepreneurs that made significant and long-lasting bets on Windows, from the earliest days. It was a fun event and when I think about it was fascinating to think we were looking back and yet Windows still felt so new and early. It was the peak of the “beginning” of the PC era, just before the internet reshaped everything. The honorees included:
Alan Cooper, creator of the visual forms package (aka “Ruby”) that was combined with the Basic programming language and became Visual Basic, which defined the client-server era of development and earned Alan the moniker “Father of Visual Basic”.
Lyle Griffin, creator of Micrografx In*a*Vision, later Designer one of the first commercial Windows applications and one of the earliest vector graphics design tools.
Joe Guthridge, leader of the development of Samna Amí, the first Windows-based word processor which was later acquired by Lotus and formed a key part of Lotus SmartSuite.
Ted Johnson, leader of the development of PageMaker the defining tool for desktop publishing and one of the first full-scale products to use a mouse on Windows. He later co-founded Visio Corporation, inventors of the category of structured drawing and modeling software (later acquired by Microsoft).
Ian Koenig, leader on the development of the Reuters Terminal financial information software, one of the earliest commercial Windows products built to be resold as part of an information service. Reuters would continue to invest heavily in the Microsoft platform for decades.
Charles Petzold, author of Programming Windows series of books that literally taught the world how to use and navigate the Windows API from the earliest days of just a couple of hundred APIs to editions of the book scaling to thousands of APIs. He also authored numerous other books including a wonderful book on, The Annotated Turing: A Guided Tour through Alan Turing's Historic Paper on Computability and the Turing Machine.
Ray Ozzie, creator of Lotus Notes (as the independent Iris Associates), which later joined IBM in 1995 when Lotus was acquired. Ray would join Microsoft in 2005 through the acquisition of his next creation, Groove, and then became Microsoft’s second Chief Software Architect and key force behind Microsoft’s entry into software as a service/cloud computing and the creation of Azure. During his time at Lotus and working on Notes, Ray worked with many different parts of Microsoft often at the earliest stages in product development including OLE, Cairo, Office, SharePoint, and of course Windows.
Together this group represented the very best of independent software vendors and power that could be achieved making a bet on the Windows platform. There were so many innovative products around Windows it seemed difficult to pick just these seven, but there is no doubt of the remarkable legacy of these pioneers, and some good friends too!
When it comes to collaborating with Microsoft and also competing, few achieved more and also contributed so much to making everyone better than Ray Ozzie.
The competition with Lotus Notes came to define the company more than anything.
While most would probably name Apple as the biggest competitor Microsoft faced, the reality of the mutually beneficial relationship was so crucial to Microsoft’s early days I don’t think that is the best answer. Some of the earliest generation of Microsoft would definitely name Novell, pioneers in PC networking, but the rise of the general purpose operating system, Windows NT and also Unix in the enterprise, was simply too much for the company.
My view is the competition with Lotus Notes came to define the company more than anything, not only in how it succeeded against Notes but also how it ultimately failed to fully capture the scenarios and implementation of Notes.
Notes is rooted in Ray Ozzie’s personal experience, especially his days at the University of Illinois-Urbana Champaign, working on a pioneering system called PLATO (Programmed Logic for Automatic Teaching Operations). PLATO was one of the first or the first systems to incorporate many of the common tools we think of today in the collaboration space: forums, message boards, newsgroups, e-mail, chat rooms, instant messaging, remote screen sharing, and multiplayer. Beyond these capabilities PLATO also developed an array of lower-level innovations in hardware and platform software including plasma displays, touchscreens, audio recording/storage/playback, and music synthesis. Suffice it to say, anyone working on such a system would have been influenced by the breadth of innovation as well as the primitive state of collaboration on other computer systems.
Ray can tell wonderful and numerous stories about the early days of CP/M and MS-DOS computing. Briefly prior to creating Notes and after UIUC, he was part of the incredibly innovative Boston-area microcomputer scene (what Texas was to microcomputer hardware, the Boston area was to microcomputer software, speaking in terms of Halt and Catch Fire). One early stop was at Software Arts working with Dan Bricklin and Bob Frankston on the original spreadsheet and killer application, VisiCalc. He later worked on a widely praised application TK Solver, a pioneer in the early space of mathematic modeling and solutions. Software Arts was eventually acquired by Lotus, makers of the MS-DOS killer application, the spreadsheet 1-2-3. There he worked for co-founder Jonathan Sachs (his former manager at his first job with Data General) who had coded 1-2-3 in 8088 assembly language with co-founder Mitch Kapor. Mitch Kapor was CEO of Lotus Development as it grew. Ray was responsible for Lotus Symphony, one of the earliest and innovative all-in-one software packages so popular at the time. Ray left Lotus and founded Iris Associates, with majority funding from Lotus, though it remained independent.
What makes all this background critical to understanding Notes is that each part of the experience Ray had is what led to Notes being the magical product it was. When I look at Notes and think of my experience working with Ray (and his co-founders) it is clear no other team would have ever created something quite like Notes.
The essence of Notes is a collection of important technologies, each on its own rather innovative and for the most part well ahead of where those technologies were in the marketplace but when connected together in an integrated fashion that innovation is amplified.
What was so special about Notes? One could easily write a book about that, but let me try to distill it down to a few attributes. I am doing this on purpose as you will see such a distillation is key to Microsoft’s ongoing misunderstanding of the product.
The essence of Notes is a collection of important technologies, each on its own rather innovative and for the most part well ahead of where those technologies were in the marketplace but when connected together in an integrated fashion that innovation is amplified. Notes is an example the value of the whole being far greater than the sum of the parts. As it turns out, if you want to compete with Microsoft this is the first critical ingredient—delivering on an integrated set of components that taken together provide an innovative solution.
While an exhaustive list would take far too much space, an abbreviated list of some of the key technologies in Notes included (arbitrarily decided to limit myself to eight):
Data storage. Central to the Notes platform was a rich data storage engine that was a hybrid between a structured relational database and an object database. At the time of Notes development, the world was going crazy over relational databases (taking over from hierarchical data models). While object-databases were starting up in graduate labs (I know because that was my lab in graduate school!), they were years from commercialization. Notes was ahead of its time in the formality of considering both data models. The data storage engine supported full semantics of a database when it came to reliability and data synchronization. I’m pretty sure in building this system Ray came to coin the phrase “synchronization is hard” as he became the definitive mind on the solutions and challenges of data sync.
Graphical forms with controls. The whole notion of graphical user interface was new and controversial and there were few tools other than those from Microsoft for Windows, and nominally OS/2. While there were many tools for developing character-based applications for MS-DOS (such as the mega-app dBase III) few employed window-like concepts and a mouse the way that Notes did. Notes forms and controls ran on MS-DOS, OS/2 and very early on upgraded to run on Windows 3.0 available close to Windows 3.0 availability (a key reason for the Windows Pioneer award).
Programming language with events. The key for Notes as it matured was that developers (and knowledgeable end-user or power users as we called them at the time) could customize existing applications and build their own applications from scratch. Initially programming was done with a language influenced by 1-2-3 @-formula language and events behind the forms and data operations. Over time a full imperative language was added, LotusScript. Graphical forms together with the programming language and use of a database constituted Notes applications. Whatever you could dream up using these tools could be built in Notes, deployed in Notes, and used in Notes all seamlessly. A Notes database contained. all the data definitions, data, code, forms, and security models required for the application all in one package.
Client-Server symmetry. A unique aspect of the Notes architecture was building symmetry across the client and server. What ran on the server also ran on the client. This greatly simplified product development in some dimensions and made it much easier for power-user application development. An application could run on a PC client or the same logic could run on the server. The reason this mattered was because it permitted full replication of data (and logic) to run where it made the most sense.
Resilient networking and connectivity. Almost no personal computers were connected by networks in the mid-1980s when Notes was being developed. What servers existed were used for mostly for sharing files and printers in an office. From the start, Notes assumed that the clients would connect over a network to synchronize data and applications. Notes was one of the first products to build-in end-to-end encryption, something viewed as overkill and certainly complex at the time. Since most networking hardly existed, even on the advanced operating system OS/2, Notes built in house much of the advanced networking required of a “modern” application, including dealing with the complexities of dial-up and flakey networks.
Notes client. Bringing this all together was the incredibly rich Notes Client. The client had all the capabilities one would expect of a viewing, browsing, connecting, and developing framework for Notes apps. Using it in its most basic state would feel like using a typical graphical database program of the era such as R:Base or FileMaker, but instead of the limits of those single-user, relational databases, with limited programmability, behind this client were all the capabilities outlined above. The client ran on multiple operating systems and all the apps created ran within the client on any of those operating systems. The infrastructure (or Notes Server) ran on the robust servers of the day, including Novell Netware.
Built-in applications for e-mail, calendaring, discussions, directory. On top of this infrastructure and client were applications for many of those original PLATO scenarios, specifically e-mail, calendaring, discussion groups, and a directory (the list of all the accounts, people, and databases in the system). These applications on their own rivaled the best of those at the time and ran across the client platforms supported. It is these applications that tended to be how most people came to understand and experience Notes, especially when it was first used in a group or company.
Sample applications spanning dozens of domains. Because Notes was a platform for development, the range of applications that could be built was limited by imagination. Still, as the product matured it became more important to explicitly show customers what could be built with Notes. These samples became known as the Nifty-Fifty and spanned scenarios from call tracking, budgeting, expense reports, all the way to race results, real estate management, telemarketing, and even recipes.
Notes fans will cringe at all the things I left off, but this is enough to make the real point of this post which is Microsoft competing with Notes.
The industry was dominated by category thinking and every application had to fit in a category.
Early on at the dawn of the 1990s, Notes was known as an incredibly innovative application but for many it was difficult to understand. The industry was dominated by category thinking and every application had to fit in a category. It wasn’t just because the industry was relatively new, but in a sense computer science was categorized: operating system, languages, databases, applications. Within applications there were clear categories of spreadsheets, word processors, e-mail, personal information management, personal finance, and of course recipes (this is a joke, but really it is amazing how often this came up).
Any application that straddled categories for some reason or tried to do multiple categories had a very hard time breaking through. One reason was simply that trying to do too much on early PCs ran straight into memory and storage limitations (Notes was notorious for this). A second reason was that an application would be lined up with all the features of leaders in each of categories and compared. Failure to live up to both meant it was a compromise and no one was prepared to compromise. This might sound familiar from the early stories about productivity suites and the debate of best of breed versus bundled product.
Notes pushed ahead creating a category called groupware, a term clearly rooted in PLATO experience. Over time the product would also be described as workgroup computing owing to the way early adoption took place in the industry, starting with groups of employees within a large company.
Notes was the undisputed leader in groupware, even though several mail and calendaring packages would attempt to compete with it (for example Novell Groupwise and Microsoft Windows for Workgroups, which had nothing to do with groupware but for some reason decided to brand itself that way in a first effort to grab some attention from Notes).
By 1993 Microsoft began to see the competitive risk Notes posed. While our enterprise efforts were early, Notes was showing up at more and more accounts.
Microsoft had an enormously difficult time even beginning to understand Notes. That might seem like the craziest thing, but it is key to understanding how Microsoft thought about technologies, platforms, and applications.
First it was there for email or maybe for a specific dedicated application that was developed in-house. We then started to see it in the big IT consultancies, particularly Price Waterhouse Coopers. At PWC, then CIO Sheldon Laube made a huge bet on Lotus Notes, deploying thousands of copies as soon as the first version was released. The firm used Notes to introduce PC based email and calendaring to the travel-weary consultants, developed scores of in-house applications specific to the firm, and then turned around and used those skills and experiences to evangelize Notes to just about every future Notes customer for years. If you’re building an enterprise product and we talk, there’s a good chance I’m going to ask you “Who is your Sheldon?”
Microsoft had an enormously difficult time even beginning to understand Notes. That might seem like the craziest thing, but it is key to understanding how Microsoft thought about technologies, platforms, and applications. There are three things Microsoft did that that make for a flawed competitive approach:
Distill a competitive product into component technologies
Consider the whole (the application) as an afterthought
View the product team response through the current organizational structure
The early thought leadership, obviously but not exclusively BillG, would look at every new product, including Notes, by starting with what category it was in and then deriving the unique elements of the product. One might even think of that scene in The Player where every movie pitch is reduced to “buddy cop” or “screwball” or “rom-com” or even more reductionist just referring to it as the latest expression of a well-known film with a bit of a twist, as in “so a PIM that integrates with email” or “a forms package with Basic as the language” (see what I did there, look at the list of Windows pioneers again).
First, when it came to Notes, Microsoft naturally distilled it down to the core technologies, much like the list I made above. Inevitably every meeting or discussion about Notes would boil down to “we really need our own replicated database” or “if we only connected our directory to email” or “how come our networking does not include discovery” and so on. In other words, we started from a list of technologies and then built a checklist of features our technologies had and saw how many Notes had. Importantly, we did not do that the other way around—start from all the capabilities of Notes and decide if we had those which for the most part would have shown Notes to be “missing” features because we had so many things unrelated to Notes requirements.
A key aspect of Microsoft in those days, and for the next decade or so, was talking about products under development as though they were already done. We definitely lived in the future we believed we were creating.
The result of this deconstruction of Notes was the conclusion that we had better parts or more checkboxes, just missing a few things. Our SQL database (which we did not yet have, but simply partnered with a third party) had better scale (though it had no object capabilities, replication, or desktop support, but clearly needed to add those). Our forms in Visual Basic 1.0 were better and our language was vastly better than the @-language in Notes, though it was not connected to a database. Our email had much better scale, though it too did not exist yet, and it would eventually have integrated scheduling. Well, you get the picture.
A key aspect of Microsoft in those days, and for the next decade or so, was talking about products under development as though they were already done. We definitely lived in the future we believed we were creating. At the same time, we also talked about products as though the ship dates were reliable. The products were not done, and most every product was years off a schedule and would not ship until the late 1990s, 3-5 years from these first Notes compete meetings. Nevertheless, it is a fascinating cultural norm that we so stridently lived in the future.
There’s an obvious lesson here—the underlying technologies of a product might not always be the most important element. Business is social science, however, and as such one would be cautioned not to generalize this to all cases. Why? The reality is that this very problem is how disruptive technologies almost always leap over incumbents. The incumbents see a new technology as inferior or incomplete relative to themselves and quickly become overwhelmed by escalating usage of the inferior technology. What might seem like a rule “don’t decompose a product into constituent parts” is generally a rule only if the other conditions below are also met.
The most obvious lesson from this aspect of competition is to appreciate a product for what it is not how you might consider it.
Second, in looking at the product we collectively could not see the whole—the application that was Notes. We were so focused on the technology components and how those would roll into platform offerings that we consistently failed to understand the compelling nature of packaging them all up as a single product that looked and felt like an application first, and then required platform just happened to be there (and required expert IT skills to deploy and administer). Microsoft in the early 90s was so decidedly a Systems or Platforms company that it consistently struggled to see a breakthrough app as an app. There’s a platform-centric view that the code that pieces together amazing components is simple—glue code BillG used to call it—when in practice the app-centric view is that the glue is everything, at least the part that makes all the difference. One of the most interesting apps, that happened to be a platform, was the browser and perhaps Microsoft learned its lesson in how it responded to that (or maybe it did not).
The most obvious lesson from this aspect of competition is to appreciate a product for what it is not how you might consider it. Microsoft failed to walk in Sheldon Laube’s shoes and insisted on evaluating Notes relative to the way Microsoft thought of the product, not how Lotus or Notes customers thought of the product. This pattern is one we saw time and again, phones were probably a good example of that type of failure.
Third, and perhaps the most impossible to overcome was that Notes, as a whole, competed with not one single group at Microsoft but essentially all of them. If you look at the list of eight technologies above, the first seven were each a division at Microsoft. Database was the nascent SQL Server group (in the process of acquiring Sybase technology). Forms and the language were clearly the Visual Basic group (or perhaps the Microsoft Access database group, shipping its first version in 1992). The Directory was part of the operating system Windows NT under development. The core networking and connectivity technologies were clearly part of the base OS. The encryption infrastructure was not even something Microsoft was working on, as “security” was something for the OS to just solve using the access model in Windows NT. Client-Server symmetry was something that was supposed to “just work” because our strategy was to build in symmetry at the OS level with Windows NT running on both the client and server, but as a practical matter that only applied to the graphical Win32 APIs and the use of NT on the desktop was a 21st century outcome. Finally email and calendaring were built in two different groups, the challenges I have been outlining the past few weeks as well as much earlier at the genesis of Exchange. Exchange was under development during the rise of Notes, as was Outlook.
Almost as an afterthought, the Nifty Fifty samples were the kind of thing that the Microsoft marketing or field sales teams would do, rarely did the product group build samples. The Microsoft Access Northwind sample was probably the best, but in general we made this mistake too often. It was something we would do better at building SharePoint team services. We had already several failed attempts at workgroup templates in Excel for budgeting as an example.
When it came to any meetings on Notes compete, representatives from all of these teams would need to be present so the meetings were kind of a zoo.
When it came to any meetings on Notes compete, representatives from all of these teams would need to be present so the meetings were kind of a zoo. If one team happened to miss a meeting it was fair to assume most of the meeting would be about that group and how that contribution was lacking. I am probably exaggerating but not by much.
Notes essentially landed between all the nodes of the Microsoft org chart. Every discussion about competing amounted to a circular firing squad. The lesson is that if you want to compete with a big company, then simply make a product that has elements controlled by multiple vice presidents.
In addition, there was always a group that had a new piece of technology under development that would race past the Notes capabilities. Often these small technology teams were studying Notes and that lent gravitas to the analysis. Whether it was underlying technology such as COM or OLE (buzzwords to be ignored for the purposes of this post), or something like a new replication engine in the database group, or a technology that dominated BillG’s thoughts for several years called Forms³, which would superset the programmable forms features of Notes (and hound me for years as the next big platform technology).
Notes essentially landed between all the nodes of the Microsoft org chart. Every discussion about competing amounted to a circular firing squad. The lesson is that if you want to compete with a big company, then simply make a product that has elements controlled by multiple vice presidents. One of three things will happen. One, they will fight over who needs to compete with you and no one will volunteer in which case nothing will happen. Second is a variant of this where all the groups will claim to compete and that can only mean absolutely nothing will happen, which is great for you. Or two, one group will stand up and volunteer to take on competing in which case you will win because no group will really do anything substantially different but assume the mantle of competing and own the message and rarely change the product.
One of the key aspects of a sale going to Notes was how unlikely it would be to unseat Notes in that account for years or even a decade. Winning was so critical because of that stickiness. If we couldn’t win, we wanted to delay.
In fact, this third approach is what Microsoft did and the Exchange took the mantle of competing with Notes. That was great. The only problem was Exchange was already behind. The architecture and feature set were nowhere near competing with Notes and substantially altering the architecture or feature list was definitely not going to happen. Exchange was building client-server email , directory, and calendaring. It would talk a great deal about a platform and APIs, but the baseline was email.
Over the course of years we held endless meetings about Notes compete. In the early days when I was first starting as BillG’s technical assistant our discussions centered on architecture and big pieces of technology we were missing. SteveB began to put a lot of pressure on Bill once the product was broadly visible to the global sales force. One of the key aspects of a sale going to Notes was how unlikely it would be to unseat Notes in that account for years or even a decade. Winning was so critical because of that stickiness. If we couldn’t win, we wanted to delay.
To delay, the field wanted tools on how to use what Microsoft did have (and by did have, that included Exchange even though it was not done yet). Bill asked me to write a memo on piecing together the technologies to compete. Writing this was the hardest thing I wrote or worked on in that role. I had used Notes as part of our dogfooding efforts and regularly attended the Lotusphere event (which took place in my hometown, Orlando at Disney). On top of those I was really an Apps person and saw Notes through that “whole” not through the sum of components.
I wrote a memo called “EMSPLAN.DOC” in October 1993 which tried to piece together a compete strategy using technologies under development and could be assembled by as few resources as possible. I hated thinking like this—it was so tactical and felt shoddy to me—but the field loved, or really needed, it. The Exchange team was all over such a plan and having already started to spin up sales efforts they took concepts in that plan and ran with them. It was kind of weird to watch because in no way did what we have truly compete with Notes, at least that is what I thought as a product person.
I suggested we start by trying to paint Notes as neither a platform nor an application. Of course this was literally true and all I was doing was reflecting how I had repeatedly said this in all our offsites and meetings, but had decided that the best thing to do was embrace this as our starting point rather than continue to fight it. Perhaps the industry would pick up on it. By way of history, it was going through this process that I clearly decided I was an Apps person (not a Systems person). In every meeting someone from Apps would say “Notes is an app, can we just admit that and then make a team of 50 developers to build that app”. I loved that. They were always shut down because of the view that apps people would build the solution on inferior architecture.
The memo then went on to detail a series of Wizards such as “Replication Wizard” which would handle copying the data back and forth. Notes built replication into the product to a level that one never really thought about it, much the way recalc works in a spreadsheet. Because replication was spread across the database and mail group we had not choice but to attempt a bridge solution.
Finally, I suggested we build sample applications. As it would turn out this was the one area the field sales resources were on fire to do and as a result Microsoft built a variant of the Nifty Fifty using the limited capabilities of Exchange, Visual Basic, and a product called EForms.
I don’t really think this memo had much impact, rather it just summarized what was likely to happen. There was no breakthrough product to be had in any timeframe. Ultimately we were going to compete with Notes with what we had. That, however, turns out to be a great approach.
As a reader you are no doubt confused as to why all of this mattered. There’s little chance most people reading this ever used Notes and a very good chance that some readers have used or continue to use Microsoft Exchange and Outlook. In other words, all this stress and talk about how great Notes is and how behind Microsoft is and yet Microsoft won. Crazy.
Before things got better they did get worse, much worse. In June 1995, in a hostile bidding process IBM acquired Lotus Development Corporation for $3.5 billion, the largest software deal in history. For Microsoft, Lotus Notes in the hands of the most formidable enterprise software company, and former best partner now officially separated and competing, was a huge risk.
There’s an old saying in enterprise software, “the best product doesn’t win, but the product that wins becomes the best product” and that saying fits Lotus Notes versus Exchange perfectly.
IBM during this time was on the upswing under new CEO Gerstner and the company was on fire. They were going all open source and Unix support, had a new mainframe, and were taking on the role of providing IT services to the world. IBM owned the account and CIO. They were a force and perhaps no single moment caused Microsoft to pivot hard to enterprise software than this deal. If we were going to become a leader in enterprise software, we now had to beat IBM head to head.
There’s an old saying in enterprise software, “the best product doesn’t win, but the product that wins becomes the best product” and that saying fits Lotus Notes versus Exchange perfectly.
While no single feature or sales motion can account for the success, what is clear in hindsight was that the ability for Lotus to create a new category with groupware ran up against the immediate customer need to provide manageable and scalable email to hundreds of thousands of employees, government workers, or soldiers in the world’s largest organizations.
Not being at Lotus or knowing the internal stories of how things evolved post-IBM it would be inappropriate for me to ascribe any of Microsoft’s success to the failings of IBM to integrate Lotus effectively. We know from the trade press and customers at the time, that try as they might, the old IBM kept showing up and demanding more and more integration of Lotus Notes technologies with the legacy platforms of IBM from databases to networking and even the failed OS/2 operating system. This had to gum things up on the Notes team with little upside for actual customers.
While no single feature or sales motion can account for the success, what is clear in hindsight was that the ability for Lotus to create a new category with groupware ran up against the immediate customer need to provide manageable and scalable email to hundreds of thousands of employees, government workers, or soldiers in the world’s largest organizations. Even after several versions, this was proving to be challenging for the Notes product. I would be remiss if I did not say there were plenty of examples of existing customers with very very large installations, but they were complex—it is just that some attributed the complexity to broad groupware capabilities since obviously managing Exchange at scale would prove to be complex.
In other words, we were back to where we started and the customer question was whether to acquire the best of breed email/calendaring solution or the bundle of groupware capabilities. As it turned out the need for email was so acute that customers essentially were betting on a “point solution” for email that might be marginally easier to deploy and manage rather than the complexity of landing what amounts to a development tool on each and every desktop.
Microsoft’s ever-expanding enterprise sales force hammered on the best and most scalable email. It surrounded that message with the strength of the new Windows Server product—Exchange email ran on Windows server which meant unification of email and file sharing platform (not to mention network management). Finally, the role of the directory (which would eventually become Active Directory in Windows 2000) was crucial and responsible for a whole different take on strategy. In effect what Microsoft did was turn the discussion to one of IT infrastructure. Ultimately Microsoft did what it was comfortable doing and it worked.
Therefore, there’s no way to view Lotus Notes versus Exchange as simply a product versus product competition, if for no other reason than the Microsoft products did not even exist or existed in uneven releases.
Importantly, I feel we were the beneficiaries of an immediate need for email across the business world. We were able to turn the need for email into a need to ride the wave of general-purpose client-server computing, rather than a new category of groupware. The Lotus effort to create a new category worked, until adopting that meant getting less in the way of email or a more complex infrastructure and Microsoft capitalized on that with an effective, extremely effective and focused, field sales effort.
Therefore, there’s no way to view Lotus Notes versus Exchange as simply a product versus product competition, if for no other reason than the Microsoft products did not even exist or existed in uneven releases. This was decidedly a competition across the 4 Ps of the marketing mix: product, price, place/positioning, and promotion. One must look at how Microsoft won decidedly in the latter three and overcame deficiencies in the immediate term in product. But those deficiencies became assets when the positioning and promotion turned groupware into a narrow category and the competing offering from Microsoft was the whole of the client-server platform for the enterprise, with the anchor of enterprise scale email/calendar. I’d be remiss if I did not also mention that while Outlook 97 was viewed negatively in reviews, when used with Exchange it did a great job showing off unique capabilities and provided an app lens on the competition. Most reviews of Exchange counted Outlook as a superior client, though lacking Mac, OS/2, and MS-DOS versions was a liability at the time. Most customer demonstrations started in Outlook for that reason.
Enterprise software is always more than a product. The competition between Lotus Notes and Microsoft Exchange provides an enduring set of lessons in that regard.
Microsoft winning corporate email played out exactly like SteveB predicted. The winner would prove to have a very sticky product and long-lasting customer relationship. The stickiness was so good that Office 365, running Exchange in the cloud, became the easy winner versus a cloud and browser-native (and hugely popular) Gmail. It is absolutely the case that the transition to Office 365 was almost entirely dependent on owning the account and the relative seamlessness of migrating to cloud Exchange (the craziness and huge costs of “porting” client-server Exchange to a hosted and then cloud environment, especially while we also were running Hotmail, is a whole other story).
Enterprise software is always more than a product. The competition between Lotus Notes and Microsoft Exchange provides an enduring set of lessons in that regard.
I tried to tell this story from my perspective. I know I left things out or worse missed out at the time on great work in some parts of the company, or even saw things that I thought failed but actually worked great but I did not see that aspect. I know for sure based on talking to people over the years, that everyone involved at the time has their own ordered list of reasons for success or failure. This is just my list and I assume responsibility for it.
I believe this is such a deep and interesting story, someday someone will interview all the principles and write a full 360-degree account of one of the most innovative products our industry ever saw in Lotus Notes and one of the most intense competitive battles that came to define the PC computing era.
I’m indebted to Ray and the many members of the Groove team who shared their Notes stories at the time of the Groove acquisition. I endeavored to do my best to reflect Notes and those stories but of course assume all responsibility for mistakes I made.
Now back to Hardcore Software.
PS: The Competition with Lotus Notes even garnered a Fortune Magazine multi-page article and mention on the cover in the December 12, 1994 issue. The text is available online.
Having spent several years watching IBM up close and personal while working on OS/2 at Microsoft, I breathed a sigh of relief when IBM bought Lotus. It was clear to me at the time that IBM would spend a ton of money and effort on Notes, but that every worthless "connectivity to OS/360 via CICS" feature that they crammed in would just make Notes less focused, more resource hungry, and less of a long term competitor. It was such an expensive and important acquisition that IBM bureaucracy could not help but smother it. IBM had a *lot* of VPs to feed.
Totally agree that the role of the directory was crucial to Microsoft's success, of course.
Well, I've had a to-do to subscribe to your writing and come read this for months, and I'm genuinely surprised nobody else from the Notes side has done so in the four months since you published.
I do find it funny you write this
" In other words, all this stress and talk about how great Notes is and how behind Microsoft is and yet Microsoft won. Crazy."
Microsoft won in email. Well, mostly, Google certainly has taken some of that market share by now as well. But Outlook did eventually displace Notes in corporate messaging.
But here in 2022, thirty two years after Notes was first introduced, it is still (as a HCL product) generating hundreds of millions of dollars in revenue and is still used by over 10,000 companies around the world.
Microsoft eventually did with Notes exactly what you describe in this article. Defined it as email, a single category, bundled the email product with must-buy Windows CALs and Office, and argued it was therefore a no-brainer to use the "free" Microsoft product. There was no way to beat the Notes custom applications, despite numerous attempts to do so, so eventually MS - and Salesforce, and every other "Notes killer" - stopped trying. And those applications keep chugging along.
There is no doubt, some of the wounds on Notes were highly self-inflicted. I ran the business through many of them, directives from way up the food chain. A classic example that I'll share was when we were told we could not invest in any sort of predictive text approach in cloud email (for a new front-end called Verse, but it was still Notes) unless it was based on Watson, and the Watson team wanted a per-sentence internal transaction fee that would have completely eroded the profit margin of the **entire Notes business**.
I would love to some day be part of the "someday someone will interview all the principles and write a full 360-degree account". I've threatened to write a history book on the whole of Lotus Notes taken from the IBM/Lotus point of view; I did some Lotusphere presentations about it but there are so many stories that I can now share (good and bad) with the distance of history. But the product is still alive, so it has never quite felt like the right time. Maybe, someday.