IBM is wading into online email service, a space where Google, Yahoo and Microsoft already have big presences. Is IBM staging a kamikaze run, giving itself one more place where Lotus Notes will show it's got difficulty competing? Is there a method to this madness? Why does IBM have its head in the clouds?First of all, we haven't had a lot of evidence to date but IBM does have its head in the cloud. It is the world's oldest supplier of integrated systems and it's trying to figure out how to become a supplier of systems in computing's latest venue -- the cloud. That doesn't mean it's about to start offering applications as a service, as Salesforce does, or infrastructure as a service, as Amazon does. But it could supply various services, business process design or a software development process, through its software and systems expertise. I think it's treating LotusLive iNotes as a test case. Lotus Notes has been losing ground in the enterprise, as best I know, to Microsoft Exchange, which can be paired up with Active Directory and other pieces of the Windows Server ecosystem. IBM is trying to breath new life into Notes by taking it to the cloud and using the cloud to appeal to the small and medium sized businesses that it hasn't been able to reach before.

Why wouldn't small and medium-sized business just use the free email systems offered by Google in Gmail or Microsoft's Hotmail? Both of these are successful consumer systems but neither is really a business system. Free email is being used by small business in some cases, but its association with consumerism, including advertising and spam messaging, doesn't help a small business convince prospective customers to take its messages seriously. At least some Gmail and Hotmail traffic ends up in the spam folder.

IBM is well aware of this. "Consumer experience on the Web is a fantastic petri dish of innovation," said IBM's Sean Poulley, VP of online collaboration services, in an interview. In other words, IBM is trying to learn from the consumer experience but apply it to the enterprise.

Google offers a business version of its email, as does Microsoft through its online OfficeLive accounts. But IBM, at $3 per user per month, can play in this space, offer secure and managed email accounts and perhaps make fresh headway. As Poulley said, IBM's price tag "is lower than Gmail's."

Despite Microsoft's on premises success, and Gmail's online success, it's still not clear which way small and medium businesses want to go; the customers are still up for grabs. In early September, after a two-hour outage, Google's PR person Andrew Kovacs told Reuters that Google counts its paid business users "in the hundreds of thousands," as recounted in the Sept. 2 Calgary Herald. Sounds like a lot, but it's likely he's referring to end users, and any number short of one million is not terribly impressive.

For example, Rackspace offers hosted email and it counts 1.5 million mailboxes and 85,000-90,000 small businesses and organizations using its online service. That's partly because it offers Microsoft Exchange as a hosted service at $12 per user per month. But it also offers a lower cost alternative for the non-intensive business email user. As Rackspace continues to sign up customers, 41% are opting for a combination of Exchange for management and knowledge workers and the low cost option for other workers, according to Pat Matthews, president of Rackspace's email division. In other words, Rackspace has found a place where it's thriving in between the Microsoft's on-premises email and Google's free online or low cost business email. "We come in in the middle. We have our own twist to online service," he said.

Matthews doesn't think IBM will compete successfully in the cloud because it can't displace Microsoft on premises, and it can't to match "free" or Rackspace type service in the cloud. But I'm not so sure.

IBM is experimenting in China with reaching a broad swath of small business through hosted online services. It has expertise in building platforms and offering them as enterprise boxes with software included. Instead of boxes, it's now looking to the cloud as a way to overcome its former barriers to small business and offer integrated services from an IBM managed platform.

IBM email comes with modest calendaring and contact management applications but the main focus is to give small business a better managed, more secure email system, and make it a collaboration platform between small businesses. Whether it can do so is a big if, but if it succeeds in getting some small business to adopt its email, other cloud services are sure to follow.

At some point, software development will be conducted in the cloud and IBM is experimenting in China in assisting small companies accomplish that. In between email and software development, there's still a lot of spaces for cloud computing to fill and IBM managed platforms may find a way to do it.