“An approximate answer to the right problem is worth a good deal more than an exact answer to an approximate problem.” — John Tukey
The issue of market share has been long debated within the Notes community. It reached a peak just over ten years ago when Exchange first gained a lead over Notes/Domino in the “Enterprise email” market. The market share for Notes continues to be questioned today. Sadly not as part of a debate over market leadership but that of market relevance. Red Pill Now’s customer’s regularly seek our guidance about the market position (and direction) of Notes to determine how best to invest in the future. For this reason we have tried to put as much science as possible into an area that lacks a lot of credible data to help formulate a picture of the Notes market now and moving forward.
Note: Red Pill Now makes no claim to be a market research company. The following analysis is used for the purpose of understanding the underlying dynamics of the market rather than accurately measuring market positions of IBM and its competitors.
For a period of time IBM would regularly quote the total number of Notes licenses it had sold. This stopped around 2009 when the number reached 150 million. As many analysts have noted this statistic was never a true indicator of current market position as it allowed IBM to place a greater emphasis on past sales when IBM was the clear market leader.
At the end of 2015 it is estimated that IBM had 36,000 active Notes/Domino customers, each having an average of 1,000 user licenses at an average license fee of $25 per user per annum. This equates to an annual revenue of $900 million.
The market for Notes has long been defined at being the “Enterprise Mail Market”. This is widely held to represent organizations with 500 employees of more. We could debate the merits of this market definition as it ignores the many smaller companies that use Notes and does not account for the significant use of Notes for application development. In fact, it is estimated that 40% of IBM’s current customers for Notes now use the product for applications only.
There are an estimated 16,000 companies in the US and 462,000 worldwide that meet the definition of “Enterprise”. Annual revenue for Enterprise Mail for 2015 has been estimated at $5 billion.
For enterprise mail, our best guess of IBM’s market share is 12% (based upon revenue). There may be as many as 20% of enterprises using Notes in one form or another but they are either no longer paying maintenance and/or using a combination of Notes/Domino with other mail platforms such as Exchange or Google.
Outside of the Enterprise…. well lets just say Notes doesn’t rate among the top ten mail clients.
Note: I am sure there are many at IBM who believe their market share is higher than 12% just as I know there are many at Microsoft, Google, and Salesforce who claim it is even less.
At a time when estimated expenditure on email is growing by around 20%, it is believed IBM’s revenue for Notes is falling at a rate of 10%. So Notes clearly continues to lose market share. IBM’s market share for Notes peaked at 60% in 2006 and has steadily fallen to 12% while Microsoft’s market share has grown over the same time to 80%. With the trend towards cloud-based email services, Notes’s position as the number two email platform will come under increasing pressure from Google and others.
Verse was released last year to much fanfare. It addresses a number of the challenges faced by the Notes client in the modern IT landscape but it is total marketing hype that is a “New way to work”. The initial indications are that its appeal will be largely limited to the existing base of 23,000 IBM customers still paying IBM to use Domino as a mail server. IBM will be able to cite a few new gains for Verse but these will not come even close to matching the number of companies now moving away from Notes/Domino.
Perhaps the biggest issue that IBM faces with its market share position is the pressure it places on IT executives for Notes shops to follow the crowd and also move away from Notes. There are fewer and fewer ISVs building solutions that integrate with Notes/Domino. IBM has had to respond with Traveler, a technology that makes Domino servers look like Exchange servers so that mail can be delivered onto iOS devices and (using Project Hawthorn) Outlook clients.
The same market share dilemma holds true for Connections. The primary market for Connections is that small group of 23,000 organizations still paying to use Notes mail. Many of the ISVs (including Red Pill Now) are developing social tools that integrate with Office 365, Box, Drop Box, Jira, Jive etc. leaving Connections out in the cold. Verse and Connections are great products technically but IBM is struggling to make them relevant outside of those 23,000 companies.
If you went to the IBM web site for Notes you could easily think that Notes was an email product only. As many of us know applications have long been a significant part of Notes. As enterprises move away from the Notes client for mail, Notes applications are coming under significant pressure to be replaced by something else that doesn’t require the Notes client. Flash is not the only thick client now under threat.
Even though the last point release of Notes (9.0.1) was over two years ago many organizations continue to rely on the Notes client for applications. As many as 50,000 organizations are still using Notes to provide access to 10 million applications. Just like COBOL, many of these applications may still be around in their current form in 20 years time because the cost to replace each and every one is too expensive. A market should continue to exist for Notes (client) developers for quite some time. Just like an aging car, organizations need to take care to maintain these applications on a regular basis or risk having them break down at the worst possible time. It is a shame that IBM has done so little to enhance the Notes client since the release of Notes 8.0 in 2007. But for the many applications written prior to 2007 there are still a great many ways to enhance those applications to keep them looking “OK” and running for a few more years.
The future of XPages is tightly tied to Notes. There is no sign that IBM plans to utilize the technology behind XPages in any of its other product offerings (including Connections). And while XPages is now offered as part of BlueMix, it is unlikely this is going to appeal to an audience outside of the existing Domino/XPages development community. For many organizations XPages is still the fastest (and cheapest) way to take existing Notes client applications and make them available from modern Web browsers. So what happens as the revenue base from Notes continues to decline? How long will IBM continue to invest in the development of XPages, a proprietary server-based web development platform? I personally would be surprised to see IBM continuing to invest in this platform beyond the next five years. As this happens a new market will develop for migrating applications from XPages to something else.
There is nothing earth shattering or new in the numbers. Deep down most of us have known the general direction Notes has been taking for the past ten years. We can debate the numbers, but ultimately organizations have to make a decision on how they will respond to the global warming of application development. Neither the Notes client or XPages development seem to offer a long term solution for existing Notes databases. I have been a big fan of Notes over the past 20 years but the ship is sinking and most companies probably have five years left to find a lifeboat to save their applications.
In October 2017, IBM made an announcement of a strategic partnership with HCL to develop Notes and a number of related products such as SameTime and Verse. The deal provides HCL with financial incentives to grow the Notes user base. It is believed HCL are taking a long-term (10+ year) to the Notes market that may see an increased level of investment in the product. Product management and sales will continue to be provided via IBM. This was probably one of the few options IBM had to impact the sales momentum for Notes and should be viewed as a positive outcome. At the time of the announcement Red Pill Now estimates there were 50,000 companies still using Domino, but only 15,000 (30%) are paying maintenance.