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Tales In Tech History: Lotus Software

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

Lotus Software had the opportunity to dominate the Office sector for the emerging PC market. What happened?

As the PC emerged as the main computing platform for millions of businesses around the world, a number of tech firms vied for the chance to become market leaders in the decades that followed.

Lotus Software was one such company, and it had a real opportunity to dominate the Office productivity suite market in what was the growing PC era of the 1980s and 1990s.

Indeed, long before Microsoft dominated the Office sector, Lotus Software had a head start with respected products such as Lotus 1-2-3 (spreadsheet) and Lotus Notes (groupware). So where did it all go wrong?

Lotus

The 1980s

Lotus Software was a much younger company than Microsoft, as it was founded in Massachusetts in 1982 by 32-year-old Mitchell D. Kapor. He came up with the Lotus name as Kapor was also a teacher of Transcendental Meditation techniques.

Microsoft in comparison was a much older rival, having been founded way back in 1975 in Albuquerque, New Mexico. It only developed its first Office product in 1988.

Lotus on the other hand had released its Lotus 1-2-3 spreadsheet product back in the heady days of early 1983, when the impact of the IBM PC first began to be felt.

 Kapor had previously worked as head of development at VisiCorp, the distributors of the VisiCalc spreadsheet, but he left that firm to found Lotus. Working alongside programmer Jonathan Sachs, they developed a new package that integrated a spreadsheet and graphics program.

Both men spent months making this package fast, and it was able to exploit the 256-bit memory that new PCs shipped with. This gave Lotus an edge over the spreadsheet capabilities of its rival VisiCalc.

As a result, Lotus was able to land $5m in venture capital funding, an incredible amount for a young software company at that time.

Lotus 1-2-3

Lotus 1-2-3

Lotus 1-2-3 was released in January 1983 and it became a huge sales success, having achieved more than $1 million in orders before its official release. It overtook VisiCalc to become the number one selling software package, and during its first nine months on the market nearly 110,000 copies of 1-2-3 were sold.

This helped Lotus become the second largest software company in 1983, just behind Microsoft.

But things were changing at Lotus, when in October 1983 it went public. Kapor however had recognised that the informal management style at Lotus needed more structure, and he brought in Jim P. Manzi, a former management consultant, as marketing director.

Manzi rapidly took over the day-to-day operations of Lotus and it has to be admitted he was not universally liked, as he hired teams of managers from corporate giants such as IBM (instead of hiring internally) to give Lotus more a more disciplined working environment.

Product Expansion

Lotus at this stage was still a one product company and it needed to diversify and develop new products. Therefore it began investing in software start-ups and began developing completely new programs.

One of these products was Symphony (a software package that included word processing, data management, and networking capabilities), but sales were disappointing. It helped matters in 1985, when Lotus bought Software Arts and discontinued its VisiCalc program.

But the PC market began to change in the mid 1980s, after the creation of the Apple Macintosh, with its graphical user interface. Lotus created Jazz for the Mac, which combined a database, spreadsheet, graphic and word processing in a single package, but again sales were disappointing despite a big advertising campaign.

Kapor at this time was also getting restless and he felt that the burden of running a large company did not sit well with his developer approach. He therefore left Lotus in July 1986, leaving Manzi in charge.

Manzi did have a bit of a headache though. Although Lotus 1-2-3 was still selling well, Microsoft was developing a spreadsheet for the Macintosh called Excel, which was more powerful than Jazz.

And the late 1980s were not kind to Lotus after delays to a 1-2-3 upgrade lost it precious market share, and its new products struggled to gain traction.

Matters were not helped when Lotus brought a lawsuit against a number of companies including Borland and its Quattro spreadsheet.

Borland won the resulting court battle.

Read more about the 1990s and the end on Page 2…