Lotus: Second largest software publisher in the world (in 1983)

41 years ago this week, on October 6, 1983, Lotus Development held its very successful IPO worth $5.5 billion. Founded by Mitch Kapor and Jonathan Sachs in 1982, Lotus was the publisher of a spreadsheet called Lotus 1-2-3, and two months after their IPO, they were the second largest software company in the world.

Powered by Lotus 1-2-3

Lotus 1-2-3 was the Microsoft Excel of its day. It wasn’t the first spreadsheet, and it wasn’t the first popular spreadsheet. That was Visicalc. Lotus 1-2-3 was an improvement over Visicalc. It was faster, it could handle more data, and it took better advantage of the power of the available hardware at the time than Visicalc. Millions of people bought IBM PCs largely to run 1-2-3.

And while 1-2-3 was their most famous product, it wasn’t their only one. Their other great homegrown product was Lotus Notes, which I would describe as a combination of Microsoft Exchange and SharePoint. Except it did both of the things SharePoint and Exchange do, it did it well, and without needing tons of maintenance. At my first IT job, our Notes administrator could go on vacation for 2 weeks, leave me in charge, and absolutely nothing bad happened. I never had to do anything other than password resets while he was gone.

Lotus grew through acquisitions as well. One company they bought was Samna, a maker of word processors. This was where Ami Pro came from. Although it was never going to be anything more than the third most popular word processor on the market, it was one of the few DOS word processors that made a successful transition to Windows, and its Windows version may have been more popular than its DOS version ever was. It had a following mostly because it was as easy to use as Word, but had better page layout capability. It blurred the line between a word processor and a desktop publisher.

Lotus also acquired CC:Mail, an early corporate email server. It was a contemporary of Novell Group Wise and Microsoft Mail. One of the reasons Notes was successful was because it was the natural upgrade path from CC:Mail.

Where Lotus went wrong

In the early 1980s, Lotus was the biggest and most valuable software company outside of Microsoft. Clearly, something went wrong that interrupted their dominance.

I think their problems started in 1984. In 1984, Apple released the Macintosh. It took about 4 years for the Macintosh to sell a million units, so it wasn’t exactly an overnight sensation. But an awful lot of people talked about it. The machine had a lot of mind share, even if it took half a decade or more to for its market share to reflect that.

There was no question the Mac would receive some use in business. So the larger software companies all set out to build some business software for the Mac.

Lotus developed a product called Jazz, an integrated productivity suite that tied together a word processor, spreadsheet, and a simple database. It was very similar in concept to Microsoft Works. Theoretically, it was a software product that could do three jobs adequately, and hopefully be easy to learn and use.

It flopped, and it flopped badly.

Meanwhile, Microsoft put its efforts into a graphical spreadsheet called Excel. It was better than the spreadsheet component of Lotus Jazz, similar in capability to Lotus 1-2-3, and it had a nice graphical user interface on it.

And then they also created a Macintosh version of Microsoft Word.

Instead of buying Lotus Jazz, it made a lot more sense to buy Word and Excel. It cost more, but the extra capability was worth it. And if you couldn’t afford those, Microsoft Works wasn’t far behind them, and unlike Jazz, Works worked. Was the “Works” name a poke at Lotus? Possibly.

Missing on the Mac meant missing on Windows

Losing out on the Mac market didn’t have to be ruinous in itself. But what’s a company like Microsoft going to do if they develop a couple of popular applications for the Mac? They are going to create Windows versions of them, of course.

Microsoft had capable versions of Word and Excel ready in 1990 when Windows reached the point that it was worth running. Lotus made a better transition to Windows than the majority of DOS software publishers, but they weren’t keeping pace with Microsoft.

The Windows 95 era

During the Windows 95 era, Microsoft did some anti-competitive things, including refusing to give necessary documentation to third-party developers that they could use to develop native Windows 95 applications until after Microsoft Office 95 was complete. What Microsoft did to Lotus was almost as blatant as what they did to Netscape.

Microsoft had a good word processor, a good spreadsheet, and a good presentation graphics program. OLE was the technology that made them work really well together. OLE was a Windows technology, not an Office technology. You could make a chart in Excel, put the chart in a Word or PowerPoint document, and then if you changed the chart in Excel, it would update in the other program without you doing anything.

Lotus arguably had a better presentation graphics program and a better word processor, but their three products didn’t work together the way Microsoft’s did. At least, not until it was too late.

Lotus and IBM: Unhappy together

In July 1995, Lotus merged with IBM in a deal worth $3.5 billion. IBM still had designs on competing with Microsoft in the software field, and they figured they could give Lotus Notes and Lotus Smartsuite a boost. It didn’t really work out that way.

Notes was a million times better than Exchange, but Exchange and Outlook worked with cool toys that Notes didn’t. Exchange and Outlook worked just fine with a Palm Pilot. It took IBM forever to get Notes working with a Palm Pilot, and once they did, the cool thing was a Blackberry. The cool toys worked with Exchange, so Notes got relegated to legacy things. Companies that had Notes and had used it for email would inevitably use it for other things as well. And once they had migrated off to Exchange, there was always something that worked under Notes and had no equivalent under SharePoint.

But that’s not a growth market.

Lotus never seemed to especially like being part of IBM, but there isn’t much reason to believe they would have done much better on their own. The momentum was on Microsoft’s side long before IBM acquired Lotus. In 2018, IBM sold what was left of Lotus to HCL for $1.8 billion.

Lotus’ legacy

But for a few years in the 1980s, Lotus was as big as you could get. The early name for the expanded memory standard on IBM PCs was LIM. LIM stood for Lotus-Intel-Microsoft. Lotus and Microsoft both wanted ways to break the 640k barrier and they wanted to do it on XT class machines. Intel saw it as a grand opportunity to sell hardware. At the time, Intel could make all of the hardware that went on those boards, including the memory.

Microsoft expected to benefit because it would lengthen the life of their platform. But the reason people bought those memory boards in the 1980s was so they could give more memory to Lotus 1-2-3. Eventually it came to be called EMS, for expanded memory, to make it sound more vendor neutral. But it was anything but vendor neutral in the beginning.

Dave Farquhar

David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.