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Lotus CEO: Notes going gangbusters

Jeff Papows revs up for Lotusphere.

Notes and Domino are selling like Valentine's Day roses, no one questions Lotus Development Corp.'s marriage to IBM anymore, and even arch rival Microsoft Corp. is receiving more bouquets than brickbats from the folks at Lotus. Against that upbeat backdrop and in anticipation of next week's Lotusphere '98 customer conference, CEO Jeff Papows sat down for a state-of-the-company chat with Network World Editor in Chief John Gallant, News Director Bob Brown and Senior Writer Paul McNamara.

Q. What themes will be stressed at Lotusphere?

A. I look forward to [spelling out] our focus from a product standpoint in 1998, which in part will be R5, the next major release of Notes [and Domino]. Remember that we just shipped 4.6, but we'll ship R5 in the second half of the year, hopefully in the early part. But the honest answer is we don't know yet. We'll have [beta] code out in the summer, but I think to be more candid about it than some of my peers in the industry typically are what that probably means, it will be the end of Q3 before we actually deliver product. Pragmatically, since we just shipped 4.6 and since we want to line up with [Microsoft's] NT 5.0 ... I'm not sure if I could ship any earlier.

Q. Will there be additional details about Version 5.0 at the show?

A. Three or four major focus items there. The first is a radical focus on [user interface] simplicity, so it will be a fairly significant UI change. R5 becomes a much more integrated product, a whole Web information management environment.

We also finished the last pieces of standards value, meaning we deal with native [Multi-purpose Internet Mail Extensions] and HTML consumption in a very powerful way. We complete the [Lightweight Directory Access Protocol] support for the client. At the same time we're going to do some things with same time/real-time asynchronous capabilities on R5. Knowledge management is going to be a major phenomenon in 1998 and the next logical step beyond it is [incorporating] messaging, groupware, accounting and scheduling, and we intend to own and dominate that market.

We've got exactly the right topology and infrastructure and all the right institutional assets here to really view that very aggressively. Knowledge management is about creation, discovery, and distribution of passive and explicit knowledge. One really forced the way to deal with that in a more assertive sense is to deal with asynchronous and well as synchronous learning. We're going to do more with same time/real-time stuff and we'll talk a little about that.

Another thing we'll be more clear about [at Lotusphere] is the client strategy. [In] the R5 time frame, we will congeal to two clients, a development client, Domino Designer, and a run-time client, Notes, and that's it.

The other big issue there is the development model. [When R5 is released, it] will be the first time where we'll have a single rapid application development and design model for these knowledge-based applications that can be fielded transparently to either a Notes client or a browser.

Q. What's the point of the Notes client then?

A. People have been telling me for years that browser is going to replace the Notes client and the Notes client is going to go away. Every year we out-ship our expectations and, you know, another 10.5 million units go out. It's about integration. It's about providing a place where you live, where all of the information from the Web -- from your messaging, from your groupware and your knowledge management applications -- come together in a single place.

Q. Other Lotusphere goals?

A. Part of the message will be one of momentum. [1997] was a banner year by anybody's expectations. The public expectation that was set at Lotusphere a year ago was to ship 8.5 millions seats. In fact, we shipped 10.5 million. In Q4, we shipped 4 million seats, which was pretty close to what we shipped in all of 1996 combined.

We probably gained something on the order of eight points of market share in the Web server market. My guess is that we [ended] 1997 with something close to 25% or 26% of the paid Web server market, which was again materially ahead of our expectations. Domino server growth in 1997 was up 260%, which was tremendous.

Q. How goes the Webtop Specification effort that was announced in conjunction with eSuite [Lotus's Java-based productivity apps] last November?

A. So far so good. One of the most exciting things about the eSuite event in November was that we were able to coalesce [Oracle Chairman] Larry Ellison and [Sun Microsystems CEO] Scott McNealy ... but also [AOL President] Bob Pittman, and Intel and Eric Schmidt from Novell and Jim Barksdale [from Netscape] and others, and we're working on a common set of APIs and a common set of specifications. It's first instantiation will be what we call the [eSuite] WorkPlace which is the eSuite desktop UI. I don't know that that will be the only instantiation, but at a minimum we'll have a common API and a common specification so that they'll all interact the same way. So it's going pretty well. Now, the projection we made was that eSuite would ship with the first NC's at Lotusphere. We're about a week off of that schedule, which for this industry is about as close as horseshoes and hand grenades. We will, in fact, have gone to manufacturing with the IBM Network Station version of eSuite by the time we get to Lotusphere. The Sun versions are about a month behind, nothing to do with us.

Q. You've said that you don't see eSuite as a Microsoft Office killer. But as your software becomes more stable, do you see hardware manufacturers that have a fair level of animosity toward Microsoft using eSuite as their offering?

A. It's an alternative. [But] we have to be very careful not to get into another industry food fight here. When I say 'we' I mean Lotus, because eSuite will fail if we don't deal with the realities of interoperability in the same way that we do with Notes and other Microsoft products, like NT and Windows. [This means] if you've got an eSuite spreadsheet you've got to be able to ingest an Excel spreadsheet. I don't want the historic notion of this industry tension to screw up the customer value.

Q. Do you have an ongoing dialogue with Bill Gates then?

A. Yeah, [we have] regular E-mail exchanges every month. I talk to him every six or seven weeks by telephone. I was out [to Redmond] last year for two meetings where I took people out to the corporate campus and brought development executives. [We] sat down with the Windows guys, NT guys and [Internet Explorer] team. I would describe our relationship as practical. And, I think customers have really appreciated us putting down the rotten tomatoes. ... We simply cannot continue to act like kids in a school yard when the customers' interests are affected. ... It doesn't mean we can't compete aggressively or that we won't.

Bill has got his quirks [and] I've got my own, but when you get down to face-to-face kind of conversations and you're trying to be generally even handed, more often than not people react in kind, and Bill's no different.

Q. Can that relationship be so friendly when the issue is Java?

A. No. We disagree on it and some of the most heated conversations Bill and I have had are around Java, although it's not as one-sided as you might think. He supports [Java] as a language. There's absolutely no issue [about that]. He doesn't support [Java] as a platform for reasons that it doesn't take a rocket scientist to understand, because it lessens his control. I support [Java] for exactly those same reasons. So we agree to disagree. Sometimes to agree to disagree in pretty colorful ways on that subject, but that's OK too. It doesn't mean that we stop talking.

The point is that whatever the issue, getting to a point where we just draw into our separate corners and shoot at each other is where the industry loses. You know the IT industry is a trillion dollar industry. To not have the principal CEO's at a point where they have the capacity to get together and talk about these tough issues is not a good thing.

That's not to say that I want to be represented as sort of Joan of Arc or the peacemaker, because I'm not. I will fight Gates and Microsoft tooth and nail to the death in Notes vs. exchange, seven days a week. I have a better product, a better service capability, a better understanding of the enterprise and a lot more in market experience and a lot more share. At the same time you know NT is real. It's growing. Customers want it. I'm going to seek to optimize Domino performance on it across multiple processors in every way, shape or form I can. I'm going to intersect with [Microsoft's] Active directory. I'm going to do a tremendous job with the channel definition formats in Windows 98, because you know what? At the end of the day, customers' lives are easier if I do that. And you know they're buying my product.

Q. This is probably a good time to segue into another matter: Given this current situation between Microsoft and the Department of Justice, what is the Lotus position?

A. We're agnostic about the browser argument. We support both IE and Navigator, always have ... and we'll do an equivalent job of integrating them both and let the users choose.

Q. But does it present you with any opportunities to take advantage of the situation to help Lotus?

A.Not really. I mean, candidly, we're not really affected other than to the degree with which Microsoft's marketing practices more generally are affected because they're being more attentive to that kind of issue. ... The browser issue is entirely Barksdale's issue and we're going to stay out of it.

Q. You've had a number of high-level executive defections recently, including Deb Besemer, your executive vice president of worldwide field operations. Are you concerned?

A. Well, it gets overblown. Let me put it in perspective: Lotus had about 5,200 employees when the IBM acquisition took place. Today we're very close to 10,000. So there have been half a dozen executives leave that get pretty prominent attention, Deb being the [most talked about] one. OK, a half a dozen people left, but put in perspective, we've also employed an incremental 5,000.

Q. Looking ahead, do you see Novell being a major competitor in the enterprise?

A. First of all, I think the world of [Novell CEO] Eric Schmidt. He's done an incredible job refocusing and re-energizing that company. So if anybody can [bring Novell back], Eric can. Having said that, we see less and less of GroupWise now [and] we saw comparatively little of [Novell] as a really valid competitor in 1997. So it remains to be seen [how Novell will fair]. They have a very difficult competitive field to play in.