Lotus Development's `1-2-3' software proves hard act to follow
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Some outside events, however, may soon be working in Lotus's favor. The slowdown in the microcomputer industry, along with the consequent softening of software sales, is expected to reverse itself in early 1986.Skip to next paragraph
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Even the problems with the Macintosh (therefore with Jazz) may not be permanent, says a spokewoman at First Software, one of Lotus's main distributors. She and others say the Mac may be the only machine than can move into the next tier of buyers -- those who haven't bought personal computers because they think they are too hard to use. If so, Jazz is well positioned for growth.
But even if that happens, Lotus has some serious questions and competitors to face. It is doing that, company officials say, but the fruits of its new strategy won't be seen right away.
``Major developments like 1-2-3 and Jazz take about two years to produce,'' says Mead Wyman, Lotus's vice-president for financial operations. ``A number of major products will be launched next year.''
Some of the seeds of those new products were planted this year, when Lotus joined forces with two spinoff companies, bought two software firms, recruited a top expert in ``artificial intelligence,'' and reorganized the company to manage its growth.
All this takes money. But Lotus has plenty of cash, even after buying Dataspeed, which pioneered the technology for Signal, for $6 million earlier this year, and Software Arts, which made the spreadsheet VisiCalc, for $2.5 million. Lotus has not ruled out future acquisitions.
Dataspeed has already propelled Lotus toward one goal: ``vertical specialization,'' that is, making software for a specific industry (in this case, small brokerage firms). Zachmann at IDC thinks that may be a good direction: Although Mr. Kapor, Lotus's chairman, ``shouldn't put all his marbles on vertical markets,'' Zachmann says, he should pay attention to them, since there will probably never be another product that cuts across the business world like 1-2-3.
Next year, says Mr. Wyman, Lotus will bring out another product that uses the same FM distribution network as Signal. One possibility, an analyst speculates, is to transmit information other than stock quotations.
Lotus's joint-marketing agreements with three companies that make accounting software are also specializing: aiming at smaller businesses that need better accounting, as well as accounting firms themselves. Finally, a big deal on next year's agenda will be a new program for engineers and scientists.
One step away from buying companies outright is sponsoring spinoffs, and Lotus is doing that, too. One of these, Arity, is one of Lotus's many forays into artificial intelligence (AI). While such technology is still a decade away, Lotus wants to use AI-related research now to make its current products easier to handle and to develop new products.
``Lotus sees [AI] as strategic to keeping its edge and market share,'' says Jerry Kaplan, a top artificial-intelligence expert whom Lotus hired as a consultant last spring. ``Mitch [Kapor] has more commitment to AI than his competitors. He's making a strategic move, not looking for short-term results.''
Lotus's marketing strategy involves diversifying not only its products, but its customers. Growth overseas is faster than in the US, says Jack Plimpton, assistant manager of the international division, and Lotus is expanding its operations abroad.
The next main push is in Japan, says Mr. Plimpton, who expects the first shipment of 1-2-3 in Japanese translation to land in the second quarter of 1986. Lotus expects sales to Japan to grow by 40 to 50 percent a year.
If funkiness were the key criterion for success in this business, Lotus would have no problem. Its annual report, complete with Matisse-looking pastel watercolors and a somewhat off-the-wall essay called ``Who's on First, or, if software drives hardware, who drives software?,'' has won two awards. Its leaping Jazz ads were the ultimate in soft sell.
But when you enter the big league, it takes more than creativity. As Lotus grows up, and the software business with it, it is finding that Wall Street demands stability as well as new ideas and risk.