Lotusphere 2010: Carol Galvin on the collaboration software market
What to do when "The Lotus" comes for you
developerWorks: Scott Laningham live at Lotusphere 2010 in Orlando, continuing our very interesting discussions. I'm here again with Todd Turbo Watson. Or Turbo Todd. Or whatever. I never get that right.
Watson: Todd, Turbo, Watson. Good afternoon, Lotuspherians.
developerWorks: And we're here with an old friend of Todd's; Carol Galvin, who is Principal Segment Analyst with IBM Market Insights, and among many things, she does support Lotus®, of course, as a part of [IBM] Software Group.
Carol, so nice to be able to chat with you today.
Galvin: Oh, likewise. Very happy to be here.
developerWorks: Was it a good lunch?
Galvin: Excellent lunch. And I was very hungry.
developerWorks: Me, too. [LAUGHTER]
Todd, I'm going to let you kind of kick this one off because you know Carol. And I was listening in on your conversation, but a lot of fascinating stuff here. Go ahead.
Watson: Yes. Well, Carol did a session on Sunday and unfortunately I missed it, so this is our opportunity to catch up, both me personally but [also for] all our listenership out there.
So first what I thought I would do is just kind of tee up a couple questions to set the stage, and then we can just go any number of directions. But I guess the first question is how big is this collaboration software market globally, you know, what's the CAGR? And then we'll go from there.
Galvin: You have to look at the collaboration market two ways: One is on-premise software, and the other one is delivering collaboration as a service.
So the on-premise software market is about US$9 billion, and it's growing about 6 percent through 2013. When you factor in the delivering collaboration as a service in the cloud, you add another US$4 billion to that. So you have a total US$14 billion opportunity.
And the highest rate of growth in that US$14 billion opportunity is delivering it as a service with an 18 percent growth. Whereas unified communications, [like] social software is around 12 percent, [and] messaging is around 1.3 [percent]. It's a highly mature market.
Watson: So let's take those, thank you for that. Let's take those and break those down a little bit. So in terms of subsegments, there is unified communication collaboration, and that would be defined as what?
Galvin: That's where you have instant messaging and telephony and web, not web meetings. But it's mostly instant messaging and telephony to buy, integrated in with collaboration. So it's that Sametime® Unified Telephony offering.
Watson: Okay. And then messaging of course, [Lotus] Notes®.
Galvin: And messaging, Notes Domino®.
Galvin: Social software is Lotus connections. And Quickr® for team-based collaboration. And the SaaS opportunity — Software as a Service — is your LotusLive portfolio which they announced today. I mean during Lotusphere®, that LotusLive will become a platform.
Watson: Okay. And [in] geographically, where do you see the market breakdown in terms of opportunity? I mean, with all the emerging economic activity in the east, for example, and China and India, are you seeing larger growth opportunities there? Is there still a lot of upside here in the west, in the U.S.?
Galvin: Well, it's like the same thing with the messaging market. It's the biggest market, dollar-wise, but it's the very slowest growth because it's so mature. So you apply the same theory to economies. The western economies are not 100 percent saturated with collaboration software, but they are sort of well along the way.
So you have smaller markets in the east, actually, where you're seeing the highest rate of growth. And double-digit growth is expected to come out of China, and about seven percent out of India. And that's where you're going to see [most growth] because you have new entrants. Whereas even in Europe you have under one percent anticipated growth.
So the opportunities for collaboration software, with respect to growth, is in the developing countries. G7 makes up three quarters of the opportunity, but the growth rate in the G7 countries isn't as robust as in the developing countries.
Watson: All right. So that gives us a great overview, I think a broad overview, of the market in terms of collaboration software. What about some of the key trends and directions that you're seeing? Obviously you, in your work, you must get some input directly from customers as well as secondary sources like the analysts and other sources. What would be some of the key themes that you see emerging?
We were talking earlier about the democratization and consumerization of IT, so that's certainly got to be a big driver — people not wanting to be led by their stodgy IT organization, but liberated into their iPhones, etc. So what are some of the things you're seeing there?
Galvin: Well, one of the major themes that we see — and I'm going to go back to growth — is that pockets of growth are in industries. And you can't just go to market with a homogeneous solution. You really need to start thinking about: "How do you solve my problem in a specific industry?" And we all have to start thinking that way.
Watson: Let me just interject something. It's really interesting you say that because as I was sitting in the bloggers briefing last night, I got really kind of a head nod from some of the key executives when I was making the point, or the question: "Well, isn't that why the collaboration agenda has been developed, because it gives you that industry-led framework?"
Galvin: That's correct. And when you go into a healthcare company giving a homogeneous value proposition across industry, it doesn't answer the question: "How do I solve my problem? I don't care about a problem in insurance or in government, I want you to solve my problem."
And quite frankly, that's the legacy of [Lotus] Notes. Notes history started with specific, business-partner, industry solutions. And it's come back to its roots because that's really where the collaboration portfolio shines within a context of answering my specific industry needs. So I thought that was kind of interesting about the collaboration agenda. It is the right way to go to market for collaboration.
And now collaboration is such a hot topic. Twenty years ago it was a bleeding-edge technology like Software as a Service is today. So you have to frame it in the context of a business problem. You can't go in with technology speeds and feeds and, you know, I have a better mousetrap than you. You have to go in speaking in the buyers' language: "Solve my problem today. I need to do more with less, and how is collaboration software going to do that for me."
And what you're seeing is CIOs and IT managers are [being] asked to do two sort of opposing things — cut costs, and make my business more profitable. So they're used to [the question]: "Can you cut costs?"
To make my business more profitable, and be a partner to my business, means well, gee, I need to invest in new systems. So if you're going to invest in new systems to be more productive, you actually have to be removing [some of the] costs [of investing in] that infrastructure. And that's where collaboration software sits so beautifully. Its value proposition is all about doing more with less, being more productive. So it's a very exciting time.
Watson: So to get more specific about the consumerization [of IT], I mean, demographically, we've got a very different audience or diversity in audience, where we have kids who grew up not knowing what the Internet was. I mean, they use it intrinsically in ways that I never would have imagined. What are some of the things that that's driving in terms of expectations in the enterprise, and how do you see Lotus responding to that?
Galvin: Well, now that the Lotus Notes campaign was conceived based on what we can see in the marketplace, which the industry pundits call the consumerization of IT, where the shifting power is going to the end user because they're frustrated with their conservative, cost-bound IT departments. And they want to use all these neat tools that they have at home and they've come to expect in the workplace, and their IT department just doesn't have the money.
So they're bringing their own tools into the workplace and actually changing the whole dynamics around expectations about what IT will deliver. So realizing the power of the end user in setting demands, Lotus realized that it really needed to attract that new generation with brand awareness.
IBM hadn't invested in a Lotus brand in a very long time, and most people thought Lotus wasn't even, you know — "The 1-2-3, [or] the Lotus"; that's what they call them, like the tide. "Oh yes, I use the Lotus." [LAUGHTER] I used to hear that a lot in focus groups. So that's sort of a joke I have — "the Lotus."
So in order to break that log jam, IBM had to invest in building the Lotus brand and its relationship to collaboration software. And it also was the incubator for all these new capabilities that are coming out of the division — that you don't want to think of Lotus just as Notes.
Notes was revolutionary 15 years ago. It set the pace for the industry. The other vendors have caught up, and now Lotus is moving in different directions, building on its legacy of being an innovator with social computing and unified communications. Where it is challenged is by the brand building, because its competitors in the market, Microsoft in particular, started as [a] consumer brand [so it] is a heavy, heavy marketing company. Cisco also is an end-user-focused marketing brand. Google — I'll call it a new entrant, but it's not that new anymore, has tremendous brand cachet with end users.
So it puts Lotus IBM in a vulnerable spot if it doesn't invest in awareness building around the brand.
Watson: Well, and I think we've seen the results here this week, that it's had an impact. I mean, I've heard a number of people commenting on just the fact that we are making that investment. We. IBM. So that's good news.
In terms of capabilities, I'm really interested to get your thoughts on how people are responding to some of these new technologies. For example, LotusLive, which I think to better define for our audience when we talk about on premise, we're talking about your traditional Notes environment where it's sitting in a room somewhere in your property, or your office location, or part of your enterprise — as opposed to the cloud solution which is saying we, IBM, are going to have a data center that's established for multiple tenants to potentially come in so that you don't have to mess with that.
And I'm interested [in] both from a biggest perspective, what are the up and downsides of that, especially versus the public cloud; and then what is the end consumer benefit because that, you just said, is so critically important for our customers if we're going to continue to have a large, significant share of this market.
Galvin: Well, the LotusLive offering extends the brand, and extends the value to those audiences that we wouldn't have been able to reach without having [it] as a service, because there's the legacy that Lotus Notes was closed, complex, and we used to call it the three Cs: Closed, Complex, and right now the third C evades me.
Having an easy on-ramp to Lotus's cachet of collaboration is what LotusLive provides. You can get on, you can taste it, you can try it. And then once you try it, then you can get more involved and then create your platform on [the] LotusLive. You can extend the platform on LotusLive.
And it's the try-and-buy that is so wonderful about LotusLive, because once you taste the collaboration coming out of Lotus, then you want more. But if the bar is set too high at the beginning, [you have] the anxiety of "oh, I'm really concerned, I don't have the skills to support this infrastructure."
Watson: Too much overhead?
Galvin: Too much overhead. I used to call the biggest objection to investing in new software is: "I don't have the budget, it's going to cost too much." And I've always called that the anxiety coat hanger. And the reason why I did that is because they didn't understand the value proposition, and they were anxious that what if they weren't successful with this new offering in IT then they could get fired.
So there's so many aspects, so many factors involved in making a decision and investing in new technology. It's not always the speeds and feeds. It's, how do I put it? IT's attitude towards their perception of their job success. And they tend, as an audience, based on the research I've done, to be mostly conservative. So you have to break through that conservative boundary.
Watson: Well, there's probably some good reason for that because if it all breaks down, they're the ones that are going to get blamed.
Galvin: Absolutely. Absolutely.
Galvin: And one of the big measures of success is that they can get home at night to see their family. And I've done extensive research understanding the motivation, buyer motivation in IT with respect to software. And that's it. You didn't need to do all that research, Todd, you had the answer already. [LAUGHTER]
Watson: So let's just close with an area that we have collaborated on that I think is a little tangential, but it's fascinating, and it really does derive, I think, from this democratization that we talked about earlier. And that's social media.
And now Lotus introducing this thought of social analytics. Can you tell us a little bit about what that is, and how Lotus and IBM customers exponentially could benefit from that?
Galvin: Well, you're talking about social analytics that was mentioned in the Connections presentation, that they're sort of managing your reputation.
Galvin: And understanding, and the linking expertise, because there's other social analytics. [So I'm]
Watson: Yes, actually that's where it seemed to me there's this notion of: "By using those tools I'm going to generate intelligence, new intelligence as we call it."
Watson: That can be actionable and useful to the enterprise.
Galvin: Absolutely, because you're cutting the time to find the expertise you need.
If you're using Connections and you have a social map, you can identify others who have similar interests and skills that you need to tap into, trying to solve a problem. And the time spent trying to find information in people is enormous.
All the industry analysts have done studies. How many hours per day, per week, we all, as knowledge workers, waste time just looking. And having these social maps around people, I mean, at IBM having a social map to identify the right person who has the right expertise; if I could do that in 10 minutes rather than seven days, then I'm a happy camper.
Watson: Well, that nails it. So I guess we always like to leave these actionables at the end. What is it that you would say to prospective customers who want to move into this realm, but there's hesitancy at the CFO's office or otherwise? How do we help them quantify the impact of that social graph and analytics that you just talked about for benefit?
Galvin: Well, we need some strong ROI calculators, and cost of ownership calculators, and customer testimonials. And I know the Lotus brand has built [one] as a matter of fact; Shawn mentioned an ROI calculator to go along with LotusLive. And there are plenty of good customer testimonials that are built. It's all: "Show me the money."
Watson: Show me the money. Scott, show me the money, buddy.
developerWorks: Conversation between Carol Galvin, Principal Segment Analyst at IBM Market Insights, and Todd Watson. Thank you both, good conversation.
Galvin: Thank you very much for inviting me to have this chat.
Watson: Thanks, Scott.