Friday, March 25, 2011

Cisco Acquires Lotus Business Unit from IBM

Cisco purchased the Lotus software business unit and all of its products from IBM corporation today for an undisclosed sum.  Ok, I'll probably see IBM advertise a Lotus product by name and show it on TV before this would happen, but really I think it would be in the interest of both Cisco and IBM to pursue this.

Ideally, the two companies would have come together long ago to form a serious partnership, and gone after the market together. And to be fair, they've tried.  Years ago they initially integrated Cisco telephony with Sametime, then Cisco acquired Meetingplace and decided to compete instead.  The partnership re-ignited a few years ago when it was clear that Microsoft was going to go after Cisco's telephony lunch, and Cisco created a great set of plug-ins to integrate with Sametime.  Heck, Cisco had been drinking the Lotus koolaid pretty heavy, internally deploying Sametime, Connections and Portal. 

But then Cisco made a series of acquisitions, including WebEx, Jabber, Postpath and Five Across.  Apparently they decided once again to go it alone.  Why?  Cisco clearly thought highly of the quality of Lotus' products--they bought and deployed them internally.  Also, Cisco clearly sees value of the overall collaboration message and has adopted much of it themselves as they speak of "collaboration" as the next big thing after unified communications (as if collaborative software just came into existence).  They also have bought into the importance of social software as they bring to market their own offerings in Quad, Show n Share and Social Miner.

For all the value Cisco saw in Lotus' software, and for all of the potential benefit to them to join with IBM and collectively put Microsoft away, and for all the shared vision the two companies possessed with the importance of collaboration and social software, something made them think they were better going it on their own. I don't have any insider information, but I have a guess.

When it comes to marketing, you can't find two more diametrically opposed companies.  Cisco markets their products relentlessly.  You see Cisco adds on TV, and you see their products in them.  You see Cisco products placed throughout TV shows and movies.  And don't say that's because they're a hardware company.  Anyone remember seeing WebEx prominently placed in the Transformers movie? 

And then there is IBM.  IBM knows how to market to businesses.  They find big transformative concepts that do a great job of capturing the attention of CEOs and CIOs, and it works well for selling middleware (see how well the WebSphere brand has done even during the recession), hardware (look at how the Power Brand has really grabbed market share) and services.

But this approach does not capture the attention of consumers.  And with the consumerization of IT, consumer desires have a huge role in driving the adoption of software "on the glass" where Lotus lives.  Without promoting Lotus software to consumers, IBM has let Microsoft negatively paint consumers' impression of Notes software.  Of course, IBM made it easy for them by focusing on the needs of IT Admins--users and usability be damned.  Lotus has corrected the usability issues, but without marketing to end users, nobody but the Lotus faithful are aware of this.

Ultimately, I don't think Cisco could stomach this.  They saw the great products, but they didn't believe IBM marketing could get it done, particularly in the US where Cisco makes its bread and butter.  Even now as Lotus throws its brand name away to try and ditch the negative image, unless IBM drives consumer awareness of its "Collaboration and Social Software" solutions, they'll be the best products that only the faithful know of.

All of that said, I think Cisco underestimated how difficult it would be to create the great software products Lotus has developed.  They bought Postpath thinking everyone would move to the cloud, and they've come to the realization that its not as easy as it looks to create a great email product, and not everyone is ready for the cloud.  Ultimately Cisco pulled the plug on their mail offering.

So now Cisco sits without the cornerstone of a unified communications suite.  One customer recently confided with a colleague, the vendor that owns email here, owns unified communications. And although Cisco is making strides with social software, their solutions really can't touch Connections (on premise or in the cloud). 

Long term, Cisco needs a complete, high quality portfolio that can compete with Microsoft at every level. With Lotus, they would have that. I suspect they believe they can integrate with Microsoft and thereby keep voicemail and call control in their stack.  Others have tried  the approach of surround and contain with their solutions, but Microsoft can leverage its monopoly to make customers an offer too good to turn down.  Once call control and voicemail is gone, handsets will follow too and Cisco voice will be displaced.

Long term, Lotus, errr, IBM Collaborative and Social Software, must get its solutions in front of consumer eyes, and not just the Lotus faithful.  Relying on the IBM brand alone to avoid the negative attitude towards Lotus will not be enough.  And if, as others have speculated, IBM merely sees Lotus as a cash cow and is waiting until the milk runs out before they grill some burgers, they won't open the purse for the marketing required. 

But maybe IBM would be willing to sell the cow.  If Cisco could afford Tandberg, maybe they could find the cash for this cow as well.  Ah well, it is late, so I guess it's OK that I'm dreaming.

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