Hello HCL (Lotus?) Notes – Bye IBM Notes

Well, that was a surprise … or not? From the beginning of the first IBM – HCL Deal, I wondered, what the point is. For both. Why would HCL take over the development of those products and let IBM do the marketing and sales, when – I think that most will agree – the other way round would have made much more sense. IBM s….. – ahem – wasn’t on top of the game selling Notes and also the other products, but it clearly had the brains on the developing side. They just did not use them lately.

Now what? C Vijayakumar (CVK), the CEO of HCL, is apparently not a Gini. He has been voted one of the best CEOs by some British magazine. So let us assume, that he knows what he is doing and he cares about HCLs products, not just the buyback of shares. In the often linked interview, he talks a bit about the deal, without mentioning a specific product. What he does, is talking about his 1,2,3 strategy and that mode 3 has the highest value for his company.
More about mode 3:

Mode 3 – this is unique to us and is about using the ecosystem to future-proof our business. Building a products and platform business, by creating innovations enabled by creative partnerships. The products are stable, long-standing products and we make them relevant for the new world. This is different from creating products from scratch. You buy the IP and see how you can modernize and make them relevant. A good example would be our work with Workload Automation, we bought the source code license from IBM and created a cloud Workload Automation solution which is very relevant in data centers, which are becoming hybrid cloud solutions. This strategy is working very well. We have numerous products in the pipeline, they are all traditional products but they are being reinvented to be relevant in the modern world. That’s the Mode 3 strategy, we not only have this on the technology side, we are doing this on the business functionality as well. We have a few things in the pipeline that we will announce shortly. We are building a strong products and platform business. This is an in-depth answer, but technically this is what is keeping us up at night.

Read the whole thing here….

It is HCLs strategy to buy products and infuse new life in them. If that works, happy days are ahead … I hope.
I can not imagine HCL just selling licences. They want up- and cross-selling. Which makes sense for HCL, but probably a bit less for partners.
CVK mentions a few numbers, 650m revenue, 5000 customers, 1.77 billion as a price, about half of it due on the conclusion of the deal.
Paying off 1.77 billion with 650m revenue over a not too long time, at the same time investing in new versions of these seven products, does not seem sustainable. The share holders agree apparently. After the announcement HCLs stock price dropped quite a bit.
CVK must have an idea, how he will boost revenue to a much higher level.

CVK said ….
It’s a mix of products, some of them are cash cows and some of them will keep growing,” Vijayakumar said. “Some of the products will need some infusion of fresh life to allow them to grow faster.”

Read the rest here…

Question is, which product is which?

Finding new customers for these products, isn’t going to work in the short term. First there have to be new and very, very exciting versions of the products, second there must be the very positive reviews and articles about these products, to make CIOs look in the right direction and third, HCL still has to convince companies to invest or even migrate. Not an easy task. Not many decision makers will change course again, after migrating to Exchange/Outlook.
I think there is something else CVK has in mind. That would be services, especially remote management. On premises hardware and software with kinda cloud management capabilities. IBM always wanted to go to the cloud with everything and never really made it and HCL might achieve something almost as good, by letting companies having their hard- and software on premises, but managing them remotely. That is an interesting approach for HCL and certainly something that appeals to many European customers, who still don’t want to go to the cloud. Especially not, if the cloud is elsewhere than in Europe. But will these customers be ready to pay more after waiting a decade for a new Notes version? The whole deal could work against HCLs, if it does not deliever enough Wow factor to keep all those customers who are not sure right now, what to think about HCL.

What does that mean for partners? At the moment, HCL must get the partners in the boat. They have the customers, not all and not the biggest, but many interesting accounts. Many good solutions come from partners. Many good ideas come from partners. IBM almost completely relied on partners, but will they still be needed in 5 years with HCL? As a partner dedicated to any of these products, it might be a good idea to get in the boat with HCL as early as possible. Actively working with HCL could give you an advantage as soon as HCL is in command. Waiting for HCL to get to you, could end in being left out. Think about it. HCL has to pay IBM for these seven products and the future development, which will be very expensive, too, because IBM just did not do that job for the last few years.
As a partner, you are either a part of the solution for HCL, or you are out. I expect the partner ecosystem to change quite a bit.
We will see soon enough, what is coming our way, but HCL Places looks very promising.