IBM plots its revenge
The company plans to steal market share from Office by giving away its software to anyone who wants it. But it’s not IBM that should have Microsoft worried.
Few people will remember this but in the second half of the 1980s, Microsoft and IBM, today arch rivals, worked closely to build a new operating system meant to replace the command line-based DOS. Known as OS/2, it was an advanced (for the time), graphically driven operating system. But by 1990, the relationship between the two companies had broken down.
There were serious cultural differences and disagreements over strategy. Also, Windows, Microsoft’s graphical front-end for DOS, had begun to take off. Soon, the company began work on a next-generation operating system, known as Windows NT, which competed directly with OS/2. In 1990, Microsoft walked away from IBM. By the mid-1990s, with the release of Windows 95, OS/2 was all but dead and Windows quickly went on to become the pre-eminent operating system for PCs.
The fall-out led to rivalry between IBM and Microsoft, which continues to this day. IBM is a big backer of Linux, the open-source rival to Windows. And in recent months it has been actively lobbying to have a new Microsoft-designed document file format, known as Ecma Open XML, blocked from ratification as a standard by the International Organization for Standardization. IBM is punting a rival to Open XML, the OpenDocument format.
But a new move last week by IBM looks set to escalate the tensions with Microsoft. The company has announced that it is developing a new office suite, with word-processing, spreadsheet and slide presentation components, that will compete head-on with Office. Known as IBM Lotus Symphony, the suite is still in test, but available for downloading.
Symphony is a direct challenge to one of Microsoft’s most successful businesses. In the year to June 2007, the Microsoft division which develops Office reported an operating profit of US$10,8bn on sales of $16,4bn, delivering a staggering profit margin of 66%. Office, which sells for up to R5 000/copy, has at least 80% of the market.
IBM has been in the commercial productivity software business for more than a decade following its 1995 acquisition of Lotus Software. Lotus developed the spreadsheet, 1-2-3, in the early 1980s and later introduced Lotus Notes, a popular program for collaboration between office workers. But Lotus has failed to make a dent in Microsoft’s dominant market share.
Now IBM is making an effort to tackle Office with a product priced to compete: Symphony is free of charge. Given IBM’s widespread access to large companies, analysts say the company could partially displace Microsoft Office among corporate customers.
It still has a lot of work to do, though: the first test version of Symphony is slow. It hogs system resources and is not as feature-rich as Office, or even the free OpenOffice.org, on which it is based.
As competition between IBM and Microsoft escalates, it’s ironic that bloated PC-based productivity suites such as Office and Symphony could soon make way for Web-based alternatives. Google is developing an online office suite known as Docs & Spreadsheets. It lacks some of the functionality found in PC rivals, but most people don’t need it. Google offers a rudimentary word processor, a spreadsheet and, as of two weeks ago, a presentation tool that competes with PowerPoint.
But now the Web giant is planning a corporate version of the software, Google Apps for Your Domain, which will offer companies enterprise-level word processing, spreadsheet, calendar, e-mail and instant messaging software. The Microsoft-IBM rivalry could soon be a sideshow.
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