IBM Plans Sneak Attack On Microsoft Office

IBM, not exactly a powerhouse in desktop applications, has its own attack on the desktop planned for later this year. IBM Software and its Lotus Software Group have built J2EE-based spreadsheet, document and presentation graphics "applications" that will be bundled for free with the company's WebSphere portal, sources said.

It's not a full-frontal assault on Microsoft Office, which controls an estimated 90 percent or more of corporate desktops. Rather, channel players and other observers see the move as something of a Trojan horse. The applications are served up "on demand" from the server.

CIOs, for whom buying portals has become a top priority, will be able to get for free what IBM says will be 80 percent of the Office functionality most people use, said one channel source familiar with the plan. "IBM can now say, 'Look, you can pay for half the portal with what you'll save in Office,' " the source said.

IT managers and the solution providers supporting them will at the very least be able to use the offering as leverage to get Microsoft Office pricing down, he said.

Resellers said many business customers remain bitter over last year's Microsoft licensing changes, which they viewed as price hikes. Microsoft maintains that Office upgrades remain a good value and that most enterprise customers can keep that application suite upgraded for about $100 per user, per year.

One large reseller agreed with Microsoft's contention, but noted that in a bad economy, more corporate customers are really scrutinizing what applications they are using vs. what they have installed and are asking Microsoft hard questions. "They're paying for all this stuff but using 10 percent of it. IBM could well capitalize on that," said the reseller executive, who requested anonymity.

Some companies are now considering upgrading just the applications they use rather than the full suite and are pressuring Microsoft to make that approach economically viable.

Ken Bisconti, vice president of messaging and collaboration solutions at IBM's Lotus Software Group, said this effort, unlike Microsoft's, represents a "cross-platform commitment and open, standard J2EE technology."

IBMers painted the move as a key piece of the company's computing-on-demand game plan. These application capabilities "will be hidden to the user, but if a business process occurs [in the back office] it'll start them up in the workplace," said Larry Bowden, vice president of Lotus products for the IBM Software Group.

IBM has not distinguished itself in desktop software. OS/2 flopped as a desktop operating system. Years ago, the company fielded, then folded, a small desktop applications group in Connecticut.

Then in 1995, it bought Lotus, primarily for Notes and Domino, but it also inherited Lotus SmartSuite desktop applications, which floundered against Microsoft Office. Lotus even experimented with componentized versions of its applications for network computer devices, but nixed that effort in 1999 after underwhelming response. (See Lotus To Pull Plug On eSuite)

But a few factors are now conspiring to make people reconsider Microsoft Office. First, the licensing debacle irritated customers, perhaps prompting some to take harder looks at Sun Microsystems' StarOffice or the open-source desktop-productivity OpenOffice suite, which are much less expensive than Microsoft Office.

Microsoft's embrace of XML is also opening a door, observers said. The Office applications now save data to that open file format, where Microsoft used to rely on proprietary data formats to lock in customers.

"Microsoft must figure out how to finesse the move to XML without having it hurt their grip on traditional markets. It's not clear how they'll pull that off, except there is a lot of market inertia," said Dwight Davis, vice president of research group Summit Strategies.

Some say Microsoft is hedging that bet as well. "Well, it's XML, but it's Microsoft XML," said Chris Letocq, strategist at Guernsey Research. "One thing that came out of the OpenOffice effort is they have access to all of the Microsoft-compatible filters via a license."

Microsoft also suffers from what many call "feature glut."

Most users, as IBM has noted, use a mere fraction of the capabilities available in a software package. "I mean, really. How many people need to embed a table inside a table? How often do you use that? Unless you're a dedicated specialist, you don't," Letocq said.

IBM executives asked about the plan were quick to say the effort is really not about the desktop, and that the functionality resides at the back end, while Office remains a client application. But those lines are blurring as Microsoft touts increasing Office tie-ins to back-end processes.

The average PC user, if he or she is not on the road, does not care where the capability resides as long as it works.

Some insiders say the IBM applications are not targeting Office users, but are more designed for deskless workers who share kiosks. But other IBMers are telling partners that Office is in their crosshairs, and that they see an opportunity to take business from Microsoft.

IBM and its Lotus unit are packing a lot more capability in the portal. The companies intend to integrate QuickPlace and Sametime collaborative and instant messaging capabilities into the WebSphere portal as well.

The move carries considerable risk for IBM as well. For one thing, the computing giant's software arm has bent over backwards to prove it is platform provider and as such is an ally to, not a competitor of, third-party ISVs. This move could send a very different signal to developers.

Pricing on the current WebSphere portal varies from $580,000 for a minimum four-processor configuration running the high-end WebSphere Portal Experience down to $77 per user for up to 2,000 users of WebSphere Portal Express, a version for midsize businesses.