IBM Lotus Soars Under Departing GM

By Clint Boulton  |  Posted 2008-04-17

IBM Lotus Soars Under Departing GM

IBM quietly promoted Lotus Software Group General Manager Mike Rhodin two weeks before his division reported a 17 percent year-over-year increase in first-quarter earnings April 16.

An IBM spokesperson told eWEEK that the Armonk, N.Y., company made the change April 1, handing over the Lotus reins to Bob Picciano, previously vice president of worldwide information management sales for IBM.

Rhodin will help Picciano in the transition before assuming responsibility for IBM software, hardware and services sales in Northern Europe July 1.

Rhodin, who discussed IBM's increased focus on UCC (unified communications and collaboration) with eWEEK, leaves Lotus on solid ground in the face of increasing competition from Microsoft's Office and SharePoint tools and Google's Apps suite.

Ovum Research analyst Steve Hodgkinson wrote April 3 that since Rhodin took the helm in 2005, Lotus has sported 13 (14, as of April 16) consecutive quarters of growth in a multibillion-dollar market for workplace collaboration software.

The Lotus Notes and Domino customer base rose from 118 million to 140 million, while the Lotus Sametime instant messaging and Web conferencing client grew from 13 million to 100 million users.

IBM offers a sneak peek at the next Lotus version. Check it out.

"Rhodin has put in a good stint at the Lotus Software Group, presiding over a significant turnaround in the fortunes of what was an ailing brand when he took over in 2005," Hodgkinson wrote.

"Lotus was muddling along sideways (and downwards in the eyes of many users-even Lotus fans) in the early part of the millennium and suffering under the confusing IBM Workplace positioning and the long-awaited refresh of the core Notes platform."

Whats Driving Lotus?

Indeed, while IBM doesn't break out specific numbers for its five software units, Lotus under Rhodin grew the second most to IBM's Information Management unit, which grew 27 percent in the first quarter of 2008 with the help of the company's closing of its Cognos purchase.

What sparked the solid growth in Lotus? Was it accelerated adoption of Notes, or did more businesses take up enterprise social networking software in the first quarter, choosing Lotus Connections and Quickr? Perhaps IBM's $1 billion investment in UCC strategy is already paying off.

Mark Loughridge, IBM's senior vice president and chief financial officer, was vague about the uptick on the earnings call April 16, acknowledging only that customers licensed Lotus collaboration and social networking software to increase productivity.

Burton Group analysts Guy Creese and Karen Hobert provided different theories for Big Blue's performance at a time when some financial experts claim the economy is getting increasingly soft.

Creese was surprised given the rapid velocity of Microsoft's SharePoint collaboration suite, a $1 billion-plus and growing product that Gartner analyst Tom Austin said grew faster in two years than any similar collaboration product of its kind.

"[We are] puzzled, in that we see a number of Notes customers either migrating to or considering Microsoft SharePoint," he told eWEEK April 17. "The loyal installed base does have new things to buy-Quickr and Connections-so while some customers are leaving, others may be spending more with IBM Lotus. Also, perhaps the international bent of IBM helped here."

To wit, IBM's first-quarter growth overseas easily outstripped its U.S. growth. While IBM's sales for the Americas grew 8 percent from the 2007 period, revenues from EMEA (Europe/Middle East/Africa) were $8.8 billion, up 16 percent. Asia-Pacific revenues increased 14 percent to $5.1 billion.

Hobert, meanwhile, said WebSphere Portal has been doing well, with significant sales in Europe over the United States. She also said IBM is enjoying license renewals even though many companies are considering SharePoint.

"Unlike migrating to Exchange, which is somewhat self-contained and there are tools to help do the migration, moving Notes to SharePoint is a lot harder to accomplish," Hobert told eWEEK April 17. "Thus many orgs will still be renewing Domino licenses, if not Notes, for some time to come, even if Domino is relegated to a Web app platform."

Can IBM keep up its strong growth?

That depends on IBM's ability to help its customers find more effective business interactions and better collaborative office working environments, Ovum's Hodgkinson wrote.


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