IBM Targets Microsoft's Office Franchise

IBM sells a portfolio of collaboration software, middleware and business intelligence software.

On Tuesday, the company also announced Foundations, a small-business hardware and software server built on a product it picked up in February with the acquisition of Net Integration Technologies. The server is intended for companies with up to 500 employees. Preloaded with Symphony and Lotus collaboration software, Foundations will compete directly against Microsoft's small business server software.

IBM estimates that a company with 20,000 employees could save $8 million annually with its free Symphony software and a services contract vs. upgrading to Microsoft Office 2007. The service introduced Tuesday is expected to get past businesses' jaundiced view of anything free.

Microsoft analyst Rob Enderle said Monday that IBM's Symphony has not yet made headway with corporations. "We are not seeing any serious effort to deploy Symphony," possibly because businesses may wait several years to replace software. "Just because we're not tracking activity doesn't mean there isn't any."

IBM said that it will surpass 1 million users this month on beta versions of Lotus Symphony, which is being commercially released Tuesday.

Businesses have been satisfied with Microsoft's Office 2003 and "are not excited about changing it out," Enderle said.

"Large enterprises are going to be more comfortable with something that is sold and delivered in a traditional fashion," Enderle said. They need to understand the economic model behind a product before committing to it due to conversion and training costs associated with ripping out old software. Freeware becomes unusable when the developer stops providing support and upgrades. And the provider may eventually decide it's no longer free.