Q&A with Stephen M. Layne, VP and General Manager of Lotus Messaging for the Communications Products Division at Lotus Development Corp.

Network Computing: How many applications does the average customer run atop Notes, including databases?

Stephen M. Layne: That's a tough one. I know there are 10 or 15 applications right out of the gate. The one we are hearing a lot about is sales force automation. We have a number of business partners extending the utilization of Notes to automate the sales force.

NWC: What are the top five applications used on Notes/Domino?

Layne: In the broadest sense I'd have to say discussion databases. Even though e-mail and messaging is being used to make it happen, it's collaboration. Another major application is document library repositoryıputting all my spec sheets in this database and all of my news stories about successful people in that database.

NWC: What percentage of your customers consider messaging mission critical?

Layne: All of them. I haven't met anyone in 1998 that doesn't see e-mail as anything other than mission criticalıI'd say two years ago half the businesses considered it mission critical, and the other half thought it was nice to have. Certainly within the past year the switch has flipped, and this is certainly true for large enterprises. It's at 100 percent mission-critical mode there. One interesting aspect is that there is beginning to occur a degree ofıI don't want to say backlash, that's not the word, but concernıthat unchecked and uncontrolled e-mail takes on some negative aspects. You'd go crazy if the phone rang 250 times a day, and for some reason we are tolerating up to 250 e-mail messages a day. This is becoming problematic for some folks.

NWC: What is your best estimate of acquisition cost today for 3,000 mailboxes, assuming Notes is used primarily for e-mail, the backend is NT, the desktop is Windows95 and the user is coming from something other than cc:Mail?

Layne: Desktop software and helpdesk support is $207,000 plus $3,600 for three servers and $4,995 for supportıfor a total of $215,500 or $72 per user for software and support. The annual renewal cost (including support) would be $62,695 or $21 per user. A maintenance contract is $19 per year per user. Helpdesk support is $2 per user per year. The rest lies in people costs. Some people take the "let people do it on their own" approach, and other people take a very rich, well-funded comprehensive high quality of server approach. They invest in IT, fund it and operate these systems with a high degree of competency. Is $500 a seat competent or gold-plated? Unfortunately we haven't gotten to the point where we measure this like office space. Some companies put you at a grade 10 and the office dimensions are like "The Dilbert Principle." People are fit in a 10x10 cubicle with a one-line phone.

NWC: How do you plan to stem the drift of cc:Mail users to Exchange?

Layne: First and foremost we have to get in front of the customers and go through the reasons why Notes and Domino is a better messaging platform than Exchange. It's a matter of blocking and tackling to get to the customers aware of what we are doing. Another thing we are doing is offering price incentives to simply move to Notes and Domino. Third, we are continuing to develop tools, utilities and software that help in making that migration as painless and simple as possible. And fourth, we are continuing to work with our business partners, third parties and our own service practices, to build an increasing workforce of specialists to help the customer make the transition.

NWC: Of those who leave, where are the largest percentage going?

Layne: It's a two-horse race. The only real competition is Microsoft, and we are starting to see people return to us from Microsoft. Exchange is basically e-mail. It doesn't have groupware, collaboration or knowledge management built into it. That's why we continue to outsell Exchange.

NWC: What percentage of users you see rely on TCO or ROI in making e-mail decisions?

Layne: Certainly, people are focused on TCO. People are trying to get their hands around it, but it continues to be somewhat problematic. Say someone puts in a new messaging environment moving from a text-only e-mail system to something like Notes/Domino or Exchange. Because people can send freelance presentations, video and audio and Excel spreadsheets, they use that capability. I do think a high percentage of them are definitely trying to do TCO, but the question is how far they go in the analysis. Some lick a finger and hold it up. Others bring in a third-party consultant and try to validate and benchmark based on what others in the industry are doing. A lot is a function of the size of the organization and the people on staff. Large banks and insurance companies are probably the most likely to do TCO. I'd say 80 percent to 90 percent of those companies go through some TCO.

NWC: What about ROI?

Layne: I don't see too many people doing ROI for base infrastructure. They see it as a cost of business, the same as electricity. They don't do ROI for electricity in the building. They also don't do it for collaboration, e-mail, utility stuff. But for specific applicationsıto say invest x million dollars in a sales automation application, that's where they look at ROI. They look at it from a couple of different perspectives. It might be financial quantitative ROI as in "we invested one million in a sales automation application with a 20 percent reduction in cost, hence it paid for itself four times over." In other cases they might measure cycle-time reduction or quality improvements. I'd say fewer than 20 percent do ROI for messaging.

NWC: At what version is cc:Mail Year-2000 compliant and how much is this driving e-mail acquisition?

Layne: DB8 is year-2000 compatible and the client compatibility is R6.03 or R8. There's a white paper on the cc:Mail Web site with all that information. We think below these levels that compatibility could be at issue in as much as 50 percent of those businesses. For some it's a real issue, and for others it's not. I'd say it's half and half.

NWC: In what percentage of cases is the driver for new mail systems that of replacing a broken system, versus reducing costs, versus providing an applications platform for the future?

Layne: Folks are looking for two things. Immediately, they're looking for a more up-to-date version of e-mail to include graphics and rich text that has calendaring and scheduling. And they increasingly want that to be coupled with an information management platform on which they can get additional value and leverage. It's absolutely clear they are looking for an applications platform for the future. This is key. People aren't just looking for replacement e-mail but to leverage that to other capabilities. We haven't spoken about this yet, but they're also looking for integration with PeopleSoft, SAP, Oracle and DB2 databases, enterprise integration.

NWC: What percentage of new customers are driven by enterprise integration and the notion of an applications platform?

Layne: More than half of our new customers are in this category. The Internet is driving this. People are trying to move as much to electronic processes as possible. They are trying to increase sales and decrease costs, and there are a couple of key ways to do that. One way is at the core of what people wind up using Notes/Domino for. Businesses succeed through innovation. If you are a newspaper, you are always reinventing your look, coming up with new stories and innovations to garner readership. Innovation is key. E-mails started out as a good way to collaborate and revved toward innovation. There are things you can do with platforms like Notes to more rapidly foster collaboration among teams of people, to speed innovations. Second, you want to keep costs in check and reduce cycle timeıyou want to reduce the expense and the inherent delays involved with taking innovations to market. Notes/Domino is being used to build applications that improve the processes and reduce the cycle time. A third aspect is that Notes/Domino extends to the extranet and everyone is looking for that closeness to the customer.

NWC: In what areas are businesses most likely to overestimate and underestimate TCO costs in a migration?

Layne: They are most likely to underestimate costs in terms of education, training and facilitationıthe outside services they need to help them. That's my experience. They underbudget and don't fully take into account what it costs to help end users.

NWC: What kinds of limitations do you see on the size of messages and mailboxes?

Layne: It's an increasing trend. I'd say 25 percent are doing this and another 50 percent are thinking about it.

NWC: Some analysts have suggested that Internet standards-based systems will have the sophistication to leapfrog Notes and Exchange within two to three years. What is your take on that assessment?

Layne: It's wishful thinking and ridiculous. Those companies can't provide the support we can. We are on the 4.6 release now of Notes. By year's end, we'll have our fifth release of Notes out there. There are well over 20 million seats and hundreds of thousands of people to install service and support this stuff. There are tens of thousands of business partners and third parties building applications around this. Just open up the want ads and look at ads for Notes and Domino. We also have the power of our parent behind us, IBM. Lotus is laser-beamed focused as a platform. Notes and Domino have crossed the threshold in the minds of many companies. It's not just an application anymore. It's a platform.