Lotus Domino and Exchange Go Neck-and-Neck

Who's winning the groupware/collaborative computing race -- Microsoft or Lotus? Research from IDC (Framingham, Mass., www.idc.com) reports that Microsoft Exchange captured 5.7 million new users worldwide to narrowly edge Lotus Domino/Notes, which had 5.3 million new users, for the top spot during the first half of 1998.

Another recent accounting of groupware purchases, however, finds that Lotus has been regaining momentum as of late. For the first nine months of 1998, Exchange led with 9.8 million seats sold, versus 9.2 million for Lotus, according to Electronic Mail & Messaging Systems (EMMS), a Washington-based market research firm and publisher (www.tr.com/newsletters/emms). But during the most recent summer quarter, Lotus sold 3.4 million licenses, versus 3.2 million for Exchange, EMMS finds. By year's end, the final tallies "are going to be close," coming in at about 13 million seats each, says Eric Arnum, editor at EMMS.

But in the big picture this is not good news for a company that once dominated the groupware industry, says Mark Levitt, research director with IDC. "Lotus should recognize that Microsoft Exchange Server is already competing very aggressively against Lotus Domino/Notes both as a messaging platform, as well as a collaborative platform," Levitt notes.

Lotus officials downplay the reports in light of continued strong growth. "Lotus has continually had strong quarters -- each quarter has surpassed the quarter before," according to a spokesperson. "Worldwide, Lotus still continues to outpace Microsoft. We went into the year with a 10 million lead on Microsoft, and will most likely finish the year with a 10 million lead."

Lotus should continue to surge ahead for the rest of the year, since it "always has a great fourth quarter," Arnum predicts. "Microsoft had a great fourth quarter, too, but its was April through June." Another factor favoring Lotus' growth is the impending release of Domino/Notes Release 5, due out in December, which Arnum predicts will "hit big." He adds that "Exchange 5.5 also hit big, but that was November 1997."

Traditionally, Exchange has been more of a messaging product with calendaring, while Domino/Notes is more of a collaboration environment that includes e-mail, Arnum says. Although the technical differences between Domino/Notes and Exchange are narrowing, Arnum predicts that Domino/Notes R5 "will once again widen this difference. It's then Microsoft's turn to do something new."

Both IDC and EMMS agree that Domino/Notes still has the largest installed base, by a vast margin. EMMS estimates that Lotus dominates with 28.5 million licenses, versus 19.8 for Exchange. IDC, which attempts to account for bundled but unused licenses, puts worldwide Lotus Domino/Notes implementations at 21.9 million -- as of June 1998 -- well ahead of Exchange's 15.0 million. Other contenders include Novell GroupWise with 12.4 million, Netscape SuiteSpot with 5.2 million and SoftArc FirstClass with 4.2 million.

The rising practice of bundling makes actual groupware usage difficult to measure, Levitt admits. Exchange may be bundled with Microsoft BackOffice suite, but that doesn't mean the product actually gets used. "The challenge that IDC and the rest of the industry faces is to accurately estimate the percentage of bundled ICE [integrated collaborative environment] licenses that is actually deployed and used for collaborative purposes during a specific time period," he says.

IDC estimates are "based on a combination of sources, including vendor supplied sales data, discussions with vendors, end-user survey data, vendor financial statements, vendor press releases, analyst experience and knowledge of the market," Levitt says. "Estimating the percentage of bundled licenses actually deployed was particularly challenging and involved all of these sources."

Bundling, in turn, "is having a tremendous effect on market dynamics," making Exchange accessible to more companies, Levitt continues. "In the first half of this year, there were millions of ICE user licenses and hundreds of thousands of ICE server licenses distributed in product bundles. Not surprisingly, vendors tend to count all of these licenses. A very rapidly rising and significant percentage of all Exchange Server users, many of whom are increasingly using Outlook as the client software, are acquiring the software and licenses as a part of BackOffice for which customers pay more than for any one of the server applications alone." Similarly, IBM and a number of other vendors bundle Lotus Domino/Notes with their systems.

The IDC study also showed that enterprise groupware products -- such as Domino and Exchange -- continue to dominate the market. A new class of team groupware, however, is just beginning to pick up steam. This challenge is led by vendors such as ChangePoint Corp. (Richmond Hill, Calif., www.changepoint.com), Instinctive Technology Inc. (Cambridge, Mass., www.instinctive.com), IntraActive Inc. (Washington, www.intractive.com), Netmosphere Inc. (San Mateo, Calif., www.netmosphere.com) and NexPrise Inc. (Santa Clara, Calif., www.nexprise.com).

"Team ICE, or groupware, is a newer variety of Web-based collaborative software that is typically designed for tactical project team-oriented collaboration by users within and spanning different organizations," Levitt explains. "System management and application customization is handled by the users themselves." Team groupware, however, currently represents less than 1 percent of the groupware market, he adds.