Steve King talks of software components and mergers (2)

By Zatni Arbi

JAKARTA (JP): Last Monday I presented the first part of my recent interview with Steve King, Lotus Development's VP for the Asia Pacific region. Here's the second part of it in which Steve shared his views on worldwide networks, mergers and component software.

ZA: Could you tell us a little bit about Lotus and AT&T joint- venture?

SK: Sure. We have a joint-venture with AT&T, the largest telecom munications company in the world. AT&T's part of the joint- venture is providing a set of services to extend Lotus Notes. If you don't know much about Lotus Notes yet, let me briefly say that Lotus Notes let people share information across work groups and across wide geographical areas. For example, many users at the multinational corporations here in Indonesia connect their computers into their headquarters elsewhere in the world on this network.

AT&T-Lotus joint-venture is a services-based venture that does several things: At the simplest level, AT&T has the high-speed frame-relay wide area network capability on its high-speed lines. In the frame-relay environment you have to pay per call, as you'd have to pay with a normal phone line. So, it allows people with Notes servers in various places around the world to use AT&T network instead of building their own WANs. A lot of companies find this option attractive, because they don't have their own wide-area network.

The second level of the venture allows companies to connect to their suppliers as well as to their customers in what we call Extended Enterprise Applications. It provides you with a better link with your suppliers and customers so that you can serve them better. One of the big companies that have been using these services is Compaq. Compaq has a Notes-based computer support system that they give to their dealers and largest customers. It contains a lot of technical information on Compaq products, marketing information, pricing and a database that answers the common questions that people ask. Using the AT&T network, the dealers can connect back to Compaq to update their databases. With the Extended Enterprise system, Compaq doesn't have to support its own wide area network that serves all of its dealers around the world. Their dealers are estimated to reach 20,000 to 25,000 at the end of this year, which is a large number of deal ers.

Another area is electronic publishing, which allows you to connect and update information in electronic publishing mode. Today, about 70 or 80 newsletters are already available in Notes format. There will be many more, and people could call up and get electronic information.

And then in the long run AT&T also sees that people will be able to do electronic commerce -- that is, buying and selling goods -- across this network. People can make offers and place their orders through it.

So, the joint-venture will be providing a mix of deliverables and will allow people to have better access to information. It's a pretty exciting joint-venture. We've just started the beta version of the system with about twelve companies in North America, and we're going to go public with it in North America early next year and we'll have it on the worldwide system by the end of next year.

ZA: I happened to read that AT&T has also entered into an agreement with Novell. AT&T will provide a network, called AT&T Netware Connect. Is the joint-venture between AT&T and Novell complementary or threatening to the AT&T and Lotus joint-venture?

SK: Actually, there's only one large joint-venture. The Novell and AT&T venture is actually part of our deal with AT&T. We see it as very complementary. It allows you to inter-network with Novell LANs across the same network. What it will mean is, as they build their services, we will piggyback. We will ride on top of their services and that will make the Notes piece better.

We see that the Notes end of it as providing very high-end services, as Notes handles multimedia very well and is very user- friendly. Notes allows you to build applications very efficiently, and the Netware piece will be very good for lower- level services, such as IDE services.

If you were AT&T, you'd have Novell and you'd have Lotus and suddenly you'd have a very powerful set of services that you could offer to your customers. So we see the Novell-AT&T joint- venture as very complementary. And, if you look at the structure of this joint-venture, it is actually a three-way collaboration between AT&T, Lotus and Novell.

ZA: The reason I was wondering about potential conflicts between these two joint-ventures was the fact that WordPerfect -- now owned by Novell -- was reportedly working on something similar to Lotus Notes. WP has been working on what it calls AppWare, which is targeted at the same audience as Lotus Notes. Don't you think WP's AppWare, when it's available, will become a threat to Lotus Notes?

SK: There are two answers to this question. As far as the AT&T deal is concerned, there will be no problem because we're the AT&T partner above the network layer. So, whatever WordPerfect as part of its merger with Novell builds, the shelf space is gone. AT&T is already committed to us for the layer above the network layer. So there's no threat there.

In the broader market, we'll have to wait and see what they come up with. But we have been in the market for several years, we have a large customer base and we have a technical lead. WordPerfect is not announcing anything that we don't already have, whereas we're already working for the future. We've got an enormous lead. Therefore, I'm not too concerned about it today.

ZA: Several mergers that have been happening in the software industry lately have made me worried. Symantec has merged with Central Point Software, and that leaves the future of two best Windows utilities uncertain. Aldus and Adobe have merged, and already FreeHand users as well as creator (Altsys) feel uneasy about it. In fact, Altsys, maker of FreeHand, has filed a lawsuit against Aldus as it believes the future of FreeHand has been jeopardized by the merger. What do you think is going on in the software industry?

SK: We are now in the stage of rapid consolidation. The software industry is rapidly consolidating itself. There are going to be very few left. There'll be room only for two to three major players, and some room for smaller players like Symantec. It'll be hard for new companies to make their entry, because they won't have the marketing capability that the major players have. Besides, the technical complexities in building today's software product makes it extremely hard to start a successful software company today.

I read about a new word processing program the other day and I said to myself, "Well, this product could be fabulous, but it's ain't gonna matter." Why? Because the new company will not have the marketing power to compete with Lotus, Microsoft or WordPer fect. There is good news and bad news about this. The good news is that you'll get first-class support from the major vendors; the bad news is that you'll have less choice.

All industries go through this stage. In the 1920s, there were 300 car makers in North America. Today we only have three. In the software industry, the same thing will happen. It may hamper innovation, but we can't help it.

ZA: I also read a rumor that Lotus had contemplated buying out WordPerfect before this word processor giant struck a deal with Novell. Is this true?

SK: Well, it's actually already on public record at this point. Yes, we did think it over as WordPerfect effectively auctioned itself. We were interested in the company since it had a very large customer base, consisting of very loyal customers. But Novell made a much higher bid than we did. However, we were not the only party that became interested in it, although we don't really know for certain who the other bidders were.

ZA: Component software seems the way to go in the future. It allows the users to buy the software that he actually needs for his work. Do you think that component software will soon replace the suites or bundles that are now leading the market?

SK: At the moment the Suites and Offices market have established themselves in the software sales. Microsoft claims that it earns about 60 to 70 percent of its revenue from its Office segment, and we don't have any reason to doubt it. At Lotus, we ourselves get over a little than a half of our sales coming from our Smart Suites. The suites and bundles have really taken over the desk top.

There are a lot of reasons for this, including price, consistency across applications and the ability to easily transport data back and forth. Price, according to some research that has been done, is actually the main driving force that makes Suites and Offices so attractive.

If we look further, however, it gets trickier. Even today, if you look at 1-2-3 Release 5.0 and Approach, what you see is actually two products built in a way that from the user's standpoint it appears to be one product. Yet building component software is not easy, as part of the engine will have to be shared by the components. This is a very complex thing to do. I agree that component software will become the trend in the long run, but at least in the coming few years, say in four to five years, suites and bundles will continue to be the dominant part of the software market.