Tuesday, January 17, 2006

Microsoft Exchange going after IBM's Lotus Notes

Today the business and technology press is awash with an announcement, presumably from Microsoft, that they are going hard after IBM's Lotus Notes. And the interesting part is not the specifics on Microsofts Exchange versus IBM's Notes strategy, even though your average IT Manager may drool over details, but that Microsoft is increasingly targeting IBM as its leading competitor. Could it even be that Microsoft sees it's future more in supplying business solutions than consumer software?

For only ten days ago Bill Gates, while being interviewed at CES, announced that their number one competitor and his number one concern was IBM, not Google etc. While you have to take such posturing with a pinch of salt, it may even hint at a strategic shift for Microsoft going forwards.

Perhaps they have recognised that Google etc are changing the game when it comes to consumer software and that in the future more and more consumer apps will go for free. Look at Google's recently announced Google Pack. You get nearly a dozen valuable PC applications that Google downloads, manages and updates for you for free. Look at consumer email. Everyone uses free services from Yahoo, AOL, Google and even Microsoft. And thanks to the open source movement and developments such as Web2.0, the trend towards free consumer software seem well set in motion. It may even be irreversable.

So, on the consumer side it may be that Microsoft sees it's future joining the charge towards free internet services based software even more than we all imagine and quicker than we imagine. This is a risky change of strategy, so it may well be that to hedge it, Microsoft will accellerate it's growth strategy and investments toward the business market, both corporates and SME's.

And the corporate market is getting shaken up as well. Just look at what Salesforce.com is achieving and changing and you realise that the corporate market is going through a similarly large change, and Microsoft may even be able to benefit from it.

And they have a solid and growing franchise. Look at their Exchange franchise alone. For a July report by Radicati Group estimated that Microsoft Exchange, the server software behind Microsoft Outlook, was on track to have 126 million users in 2005 compared with IBM's Domino, the server software underlying Notes, which was expected to have 88 million customers.

In market share terms, Microsoft had 32% of the 389 million users of e-mail and collaboration software, while IBM had around 24%, Radicati estimated.

By 2009, Radicati estimates that the number of Microsoft Exchange users will rise to 200 million users, or 37% of the corporate market. And both Microsoft and IBM clearly feel that their corporate messaging solutions could prove to become important hubs of software and services to companies well into the future. As Exchange and Domino tie together a family of web services and communications tools that extend across the enterprise and into the wireless universe. And none of this software is free. Or looks like it's gonna be free for a long time.

And lets face it, if you own corporate communications and collaboration as well as office applications you have a strong and ubiquitous coporate franchise to build out from. That could get Microsoft more and more into enterprise infrastructure software with the likes of .net etc as well as enterprise applications. Imagine if Microsoft bought Salesforce.com (assuming the regulators ever allowed them).

So, you see the future could well be bright for Microsoft in the business space, perhaps much more rosy than the dramatically evolving future for consumer software. So, maybe IBM is Microsoft's number one competitor after all. That would presumably make Sun and Oracle and SAP etc their number 2,3,4... Mmmm, so where does that leave Google? Maybe with a larger opportunity than we all thought.

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