Lotus Hopes 'Notes' Will Be a Hit

WHILE on a trip earlier this year, Jim Manzi got a hot marketing idea.As the head of Lotus Development Corporation, one of the world's largest software-only companies, he might have followed the usual corporate practice and passed the idea on to a subordinate. Typically, he says, the subordinate would file the idea or pass it on to someone else, who might file it or pass it on. Instead, Mr. Manzi wrote up the idea on his computer. Because of some innovative Lotus software, the message went company-wide. Sure enough, a Lotus employee in Britain ("a guy who I have never met," Manzi says) responded with some ideas. "This obliterates the organizational structure," Manzi says, indicating the Lotus Notes software loaded on his computer. "It improves the velocity, the accessibility, the quality of information that flows through an organization." It may also determine Lotus's future. Ever since the company created its bestselling spreadsheet program, called Lotus 1-2-3, a decade ago, it has seen nothing but growth. Lotus 1-2-3 dominated the market, became a corporate standard, and made Lotus the world's largest software-based company. Recently, though, Lotus's growth has slowed. It lost its No. 1 ranking to Microsoft Corporation. Rivals have chipped away at Lotus's dominance in spreadsheets. Other software companies wonder if Lotus has become a one-trick horse: clever in spreadsheets but little else. That's why Lotus Notes is so important. It represents Lotus's chance to diversify into a new - and potentially huge - market. "I haven't felt this good about the company in four years," Manzi says. "I think we're extremely well-positioned." The product takes Lotus into the exciting but ill-defined world called enterprise computing. The idea is simple enough. Companies are tying together their stand-alone desktop computers into huge networks, under the theory that people will work better if they can share information. Lotus Notes provides one method of doing that, allowing colleagues to send messages back and forth or company-wide, like electronic mail, but it also allows them to collect and organize those responses and the rest of their work in a whole new way. Lotus hopes Notes becomes a runaway success in the 1990s like Lotus 1-2-3 was in the 1980s. Manzi says he spends half his time on the project - a reflection, he says, of its potential revenue for the corporation. Reviews of the product are mixed. "Lotus Notes is one of the great, great products right now," says George Colony, a computer analyst and president of Forrester Research Inc. in Cambridge, Mass. "Never in my career have I found so many happy users. This is a major home run." "I don't know what we'd get," says one West Coast software executive derisively, when asked if his company might acquire Lotus. "Lotus Notes? What's that going to do for us?" "The jury is still out" on Lotus Notes, says Bruce Lupatkin, managing director of technology research at Hambrecht & Quist, an investment firm. "Generally, people like the product. [But] it's a difficult product to sell because it's a difficult product to explain." Sometimes, such breakthrough products become bestsellers. Sometimes, they languish, as Lotus found out with its acclaimed but difficult-to-explain software package called Agenda. Lotus clearly needs to diversify. Once dominant in the spreadsheet market, Lotus is losing market share. In 1989, Lotus 1-2-3 accounted for 53 percent of spreadsheet units shipped worldwide, according to Dataquest Inc., a market research company. By 1990, its share fell to 47 percent. Borland International's Quattro Pro spreadsheet was No. 2 last year, with 20 percent of the worldwide market. Lotus began to fight back earlier this year by offering steep discounts to users of rival spreadsheets. That's a strategy that Borland used to woo users of Lotus 1-2-3 in the first place. The market battle will remain intense, because last month Lotus released 1-2-3 for the wildly popular Windows 3.0 operating system. The product now allows Lotus to compete directly with its other main challenger in spreadsheets, Microsoft. In the long term, though, the company must move into new products. "1-2-3 Windows ... for the 1990s is powerful, but it's not enough," Manzi says. The three areas of software he sees for the decade are communication, networking, and portability. Lotus already has made good strides with its electronic mail communications package, called cc:Mail. It has high hopes for Notes in the networking area.