Mike Rhodin, the general manager of the Lotus software division of IBM, is in charge of a very large business inside an incredibly larger business.
The difference between the Lotus software business and the general IBM monolithic business is that software sales have grown at a much high percentage that the rest of IBM’s business put together.
In terms of overall revenue, the Lotus number is still small compared to big blue, which tallied US$98.79 billion in 2007. This is why when Rhodin makes an announcement it has to be dramatic such as the first social networking software (Lotus Connections) last year at Lotusphere conference.
At this year’s Lotusphere conference, Rhodin made several new product announcements, positioning moves, a major partnership with SAP and a big acquisition of Toronto-based Net Integration. The most dramatic of them for the channel might be the release of Lotus Foundations, which positioned the division squarely in the SMB. With that, Lotus Foundations becomes the division’s biggest channel move in its history.
Rhodin took time out of this schedule at the conference to sit down with the press. The following is an edited transcript.
CDN: You made several announcements here at the Lotusphere. Which one was the most important?
Mike Rhodin: It really depends on the customer set. I have a global responsibility and tens of thousands of customers, and have to serve multi-constituencies. SAP is more important to large customers and then I think of the dramatic expansion to the SMB for us. It’s a different market and the unified communications announcments are important, with a market in turmoil with the shift happening in the voice, video and communications world as they move more towards an IP-based system. I view them in context to markets they serve and the other one that characterizes the strategy is Web 2.0. The work we have done there with portals, Mash-ups and Quickr are all very important. They all serve different markets and constituencies and that is how you widen the portfolio.
CDN: Lotus had nine per cent revenue growth last year. What do you expect for 2008?
M.R.: I can’t answer that question. With Lotus, there is opportunity, up-side and downside and I have to pay attention to financial markets and the economy if that goes into recession. I would not even guess. My job is to grow the business and this is a step forward into growing the business and I can’t predict what the markets will do around this. What I am focused on is providing things my customers find of value that they will spend money on. Will it help them grow their business or save them money? Over the last 24 hours the signs are good.
CDN: Why does IBM, and Lotus for that matter, want to embrace the SMB now?
M.R.: The first statement is misleading. Why now? In large part, the Lotus business is SMB. What I did not have is the small business server and that is Lotus Foundations. I think we had a much more well oiled machine reaching that market a few years ago and of late we focused on the enterprise and the market has evolved to SMB. It’s the fastest growing segment and an opportunity for us as the enterprise collaboration market becomes saturated. It’s at 92 per cent share with us and Microsoft. There is just eight per cent to go and we’ll look to grow that business. We came up with a set of ideas with a value proposition that is interesting to small and medium business. In the enterprise Microsoft and us are vying for that business everyday. The great thing about SMB is that a new business is buying their first server everyday and it is a very interesting market.
CDN: Is it safe to say that your channel commitment going forward will increase dramatically?
M.R.: The Net Integration acquisition will bring about 2,600 channel partners with less than 10 per cent overlap. The IBM brand will accelerate the business in the channel. The new offering will appeal to existing channels so we will see a lot of opportunity in this space as it evolves.
CDN: Net Integration is a key part of your SMB strategy, but why them and could you not do it on your own?
M.R.: We came up with the strategy to approach them. We knew them for two years so as I conceived of it my plan was to acquire them as a base. They have tremendous technology that will accelerate our business. We could’ve built everything from scratch, but Net Integration understands the SMB and IBM. IBM tends to focus on enterprise computing and they have a level of expertise. This is as much about the talent and know-how as it is the technology.
CDN: Is what you are doing now in the SMB an appropriate response for Lotus in the market or could you have addressed this with a smaller subset of the SMB market?
M.R.: We are focused on Lotus Foundations in the under 500 employee companies. We believe that the under 250 area will be the bulk of it. As IBM, we tend to focus on the larger end of things. By IDC’s estimation there are 64 million worldwide businesses of 1,000 employees and under. That is a big target. I think there is a lot of new ground in that space for us.
