How Lotus changed the business world

On Saturday, Mitch Kapor and about 650 of his friends and former colleagues will get together in Cambridge to celebrate changing the business world.

In 1982, Kapor cofounded Lotus Development Corp., the Cambridge software company that developed Lotus 1-2-3, the program that persuaded corporate America to start using desktop computers.

Years later, as 1-2-3 was supplanted by software from rival Microsoft Corp., Lotus struck again with Notes, the first "groupware" software to let teams of workers use computer networks to manage complex tasks.

Today, 1-2-3 is forgotten, while Notes's leadership in workplace collaboration is challenged by Microsoft's Exchange software.

Lotus itself became part of IBM Corp. over a decade ago. But at Saturday night's reunion, the "Loti"-- as Lotus workers call themselves -- will commemorate the old days, with a "staff meeting" of former executives and a concert by the Tempting Fate Revue, a rock band led by onetime Lotus general manager Frank Ingari.

For the Loti, the old days were a time when Lotus was one of the hottest software companies around -- and an exceptionally pleasant place to earn a living. Benefits and perks that were unusually generous for the 1980s and 1990s, and management had a style that helped turn workers into leaders.

"Many people have come back to me and said, 'As I think about it, Lotus was the best place I ever worked,' " Kapor said.

Kapor had worked for VisiCorp. , makers of the first spreadsheet software, VisiCalc. He was sure he could make a better product. Kapor and cofounder Jonathan Sachs also wanted to create a company with worker-friendly policies that would attract and retain top-notch talent.

"We probably had the most generous benefit package in the state," said Jim Manzi, who came to Lotus as a management consultant and was appointed president in 1984.

For the first few years, when the employee headcount was still fairly small, everyone received shares of Lotus stock as part of their compensation, Manzi said. Later, the company provided day-care services to workers with children, and became one of the first major US firms to offer benefits to employees in same-sex relationships.

"There was an extraordinary amount of care about diversity and working mothers," said Jeff Papows, Lotus's president from 1996 to 2000. "Mitch and Jim were the ones that started that stuff. It wasn't me. I just tried to be a caretaker of it."

Lotus's management policies also provided valuable business experience for people who would go on to executive jobs at other companies, said Frank Ingari, former general manager of the Lotus spreadsheet business.

"Jim structured it as a set of units, and each unit had its own responsibility to deliver a profit each year," Ingari said. "There were many people like me who had a chance to run an operation for the first time in their careers . . . it was a very broadening experience."

Ingari went on to become chairman and chief executive of Shiva Corp. , a networking technology company later purchased by Intel Corp. He has just been named chairman of Purkinje Inc. , a medical records software company in St. Louis.

Still, Lotus lost its dominance in the spreadsheet market when it focused on developing a version of 1-2-3 for the OS/2 operating system being codeveloped by Microsoft and IBM. OS/2 was supposed to replace Microsoft's decrepit MS-DOS system, but the project faltered, and Microsoft instead focused on developing Windows.

Lotus was late in making a version of 1-2-3 for Windows, while Microsoft in 1987 released a Windows version of Excel, a spreadsheet program it had created for Apple Inc.'s Macintosh computers. Excel's success meant the end of Lotus's leadership in spreadsheets, and might have spelled doom for the company.

Luckily, Manzi had kept his word to a software engineer who'd helped develop 1-2-3 and a second product called Symphony. Manzi had promised the engineer, Ray Ozzie, that he'd help him set up a software business of his own. In exchange, Lotus would get the right to market the products Ozzie would develop.

"Mitch and I worked out an incredibly creative arrangement that gave me what I wanted -- the ability to build a great development company -- while giving Lotus what it wanted -- the ability to build a great new business," Ozzie said.

In 1984, Ozzie set up Iris Associates and began work on a program that would let teams of workers connect their computers, share information, and oversee complex projects. It was the software that became Lotus Notes, and when it was introduced in 1989, it not only saved Lotus from disaster, it restored its reputation as an industry leader.

Microsoft chief Bill Gates was impressed-- he once called Ozzie "one of the top five programmers in the universe."

When Ozzie left Lotus to found another collaboration software company, Groove Networks, he struck up a business alliance with Microsoft, which eventually acquired Groove. Today, Ozzie is Microsoft's chief software architect, a job Gates once held.

The success of Notes ultimately led in 1995 to an extraordinary hostile takeover attempt by IBM Corp., a company not usually given to such aggressive moves. In the end, Lotus and IBM came to terms, and what was once the Boston-area's biggest independent software firm is now part of IBM.

According to recent IBM sales figures, demand for Notes remains strong. But Kapor and others said that while Lotus is alive and well, it no longer has the kind of world-changing influence it wielded as an independent company. "It was not one of the small handful of enduring institutions," he said.

But the company's innovative software and workforce policies helped set standards the rest of the industry still tries to meet.

"It had a very good run," Kapor said, "and it had a huge impact."

Hiawatha Bray can be reached at bray@globe.com.

Correction: Because of a reporting error, a story on a reunion of Lotus workers in yesterday's Business section incorrectly identified the former Lotus Development Corp. executive who helped programmer Ray Ozzie form his own company. Ozzie was assisted by Lotus cofounder Mitch Kapor.