Why VMWare bought Zimbra: It's the seats

Why VMWare bought Zimbra: It's the seats

Summary: Zimbra has been the sleeper cloud-based email provider for the enterprise. I've known about the Bechtel deal -- roughly 50,000 seats globally -- for some time, but couldn't talk about it.

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Zimbra has been the sleeper cloud-based email provider for the enterprise. I've known about the Bechtel deal -- roughly 50,000 seats globally -- for some time, but couldn't talk about it. Though it's been a while since I've spoken to Ramesh May, he did share some important facts with me:

1. Zimbra's code base is open source, with a 20,000 active members in the community. This code base, which runs on Linux, is also the foundation of Cisco WebEx Mail (formerly PostPath) user interface.  

2. Yahoo! Zimbra was selling an email seat for $28/mailbox/year for 50+ seats. We'll be interested to see how the pricing changes.

3. The company was working with the community on adding instant messaging, expanding widgets, and building an offline email client. We also saw some interesting mashup and document viewing features.

4. Back in April, the company had 130 employees, 600+ .edu customers, 44M mailboxes, and 60,000 customers.

So why hasn't Zimbra been bigger on the national stage selling its hosted (80% of seats) and on-premises (20% of seats) email and calendaring solution? Two reasons.

First, Yahoo! did not build a direct sales force that way Google and every other enterprise email provider did.

Second, because a lot of these seats are sold through service providers. Comcast and NTT Communications have been selling Zimbra seats. You may be running Zimbra and not even know it.

So now it becomes clearer why VMWare bought this massively successful email provider. 

1. The cloud email market gains a high-quality competitor. A high-quality email solution hits its stride and provides yet another alternative to LotusLive.com, Exchange Online, Google Apps, and Cisco WebEx Mail. IBM has been making hay with service providers white labeling LotusLive.com. Google's reseller channel is almost 1 year old (see last year's post). Cisco WebEx Mail is about to kick in. And Microsoft has dropped the cost of an online email seat in half in the past year. Let the competition begin!
2. VMWare expands its stack to include SaaS, a move to help service providers and the channel sell seats and win accounts. VMWare now as an application to go help service provides and channel partners win business. With the future of cloud computing wrapped up in the business models of service providers, VMWare has raised the bar for every other cloud technology supplier. Let the cloud channel wars begin!
3. IT shops get another reason to develop their internal clouds. Remember, Zimbra can also run on-premises. With VMWare's virtual machine running Zimbra, IT pros can build out their virtual data centers with a real application: email. And they have only one throat to choke if something bombs: VMWare's. How much better is that for mastering an internal cloud than having to piece together the entire stack carte blanche? Let the internal cloud build out begin!

 

Love to hear from you on this.

Topics: Virtualization, Collaboration, Hardware, VMware

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2 comments
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  • Still not sure why this makes sense...

    I can't see VMware buying this just for the
    seats and a channel enabler. Somehow email
    just doesn't seem like the killer app that will
    prime the VMware channel pump and make sales
    start flowing. If VMware is looking for an open
    source development platform with a strong
    developer community, then maybe this is a good
    deal - if they plan to build other value added
    cloud apps. But my fear is that it will
    distract them from their core competency.
    Seems like a better acquisition strategy would
    center around cloud planning/facilitation -
    something like a ServiceMesh or similar
    company.
    rkeahey
  • RE: Why VMWare bought Zimbra: It's the seats

    Hi Ted,


    Good analysis. It's pretty amazing how many seats
    Zimbra has without really being in the "discussion"
    to-date about cloud-based email. I'd be interested to
    see how many of the Zimbra end-users are consumers
    (e.g., getting email via their ISP using Zimbra)
    versus businesses.

    I also am interested in seeing how VMware weighs
    running a Zimbra service itself (where it ends up
    competing with other email hosting providers that use
    VMware software) versus simply providing Zimbra
    software to its hosting providers to run. There is
    probably a channel conflict challenge they'll have to
    overcome.

    Nick
    mehtanick@...