The Future of E-Mail Management Vendors

The e-mail management market has not changed significantly during the past decade. We believe several new market dynamics - increasing threats to systems stability, broader recognition of e-mail as mission-critical, increased attention to mail economics, and the need for broad policy enforcement - will result in rapid vendor innovation and aggressive merger activity during the next several years.

META Trend: As ad hoc electronic communication grows in importance (e.g., e-mail, instant messaging, Web conferencing), organizations will be challenged to create a hygienic and low-cost infrastructure, with special attention through 2005 focused on spam blocking, policy enforcement (e.g., archiving, regulatory compliance), and relevancy (e.g., knowledge management). Through 2007, rising electronic communication volumes will frustrate users coping with information overload. IT groups, struggling to manage resource consumption, will accelerate server consolidation and use of centralized topologies to reduce e-mail and instant messaging costs and risk.

Growing acknowledgment by Global 2000 companies that e-mail is a mission-critical system is changing the market in numerous ways. The need for extreme stability, for example, has led companies like IBM and Oracle to introduce new mail systems based on enterprise-grade components such as relational databases and application servers. Another area that will be altered by corporate requirements for e-mail system stability is the e-mail management market. We expect the mail management market to grow rapidly and experience substantial turmoil during the next several years, driven by the following five fundamental factors:

• Criticality of e-mail: A recent META Group survey revealed that 80% of business people prefer to use e-mail rather than the phone for internal communication with colleagues, thereby forcing organizations to emphasize e-mail system reliability.
• Regulatory restrictions: Governmental regulations and internal records management policies require e-mail archiving, supervision, and encryption, thereby forcing organizations to implement better e-mail controls.
• E-mail threats: Malicious attacks directed against mail relays - such as denial-of-service attacks (primarily via buffer overloads) and dictionary harvest attacks (for acquiring names) - are on the rise.
• Policy enforcement: Legal and human resource concerns about circulation of salacious content and inappropriate discussions are leading organizations to consider automated policy enforcement.
• E-mail economics: Most organizations have only a basic understanding of e-mail costs. These companies are now aggressively examining e-mail economics, with the intention of driving costs out of the system.

We believe these dynamics will cause organizations to increase spending on mail management during the next several years by 3x its current allocation (about $22/user/year). Sensing a significant revenue opportunity, we expect vendors to build out multifunction management tool suites, which ultimately will be extended to instant messaging (IM) and Web filtering. This strategy is already in evidence at several vendors, including NetIQ, which augmented its core Exchange monitoring and reporting tools with the acquisition of Mail Marshall for spam protection and instant messaging coverage, and SurfControl, which has moved beyond Web filtering to include mail and IM filtering.

By 2007, we expect the mail market to change from an industry characterized by many small suppliers (currently forcing organizations to stitch together complete solutions from multiple vendors) to an industry dominated by six to nine large vendors that will offer a quasi-complete range of e-mail management services. Furthermore, we believe the nature of mail management will shift from a focus on internal systems monitoring to perimeter management, leading to the creation of what META Group calls an “application security gateway” for e-mail. These large suppliers will address a panoply of needs, including spam and virus blocking, protection from denial-of-service and other malicious attacks, message encryption, message control (e.g., expiration; prohibition of forwarding, printing, and saving to disk), supervision (primarily to meet regulatory requirements), archiving, and content/file blocking, all wrapped inside a comprehensive policy enforcement engine. Eºmail systems monitoring/reporting will be separate from these hygiene needs and will be supplied by the e-mail vendors themselves and by large console vendors. We also anticipate emergence of a healthy hosted market for e-mail hygiene services. Market consolidation of single suppliers benefits organizations in that broad enterprises will have a common console for most mail management needs, creating administrative (and hardware) efficiencies and facilitating corporate policy execution.

The existing mail management market can be broken down into three categories:

1. Small, specialized suppliers (e.g., Tumbleweed, ActiveState, Group Technologies): These suppliers run the gamut from e-mail archival companies (e.g., KVS) to spam protection (e.g., Proofpoint), to Exchange reporting (e.g., eIQ) and represent the most vulnerable category in the e-mail management market. We expect the vendors in this space that have competitive advantage or large installed bases to be acquired during the next three years. Corporate interest in best-of-breed, antispam solutions has given a boost to this category, but we expect this success to diminish rapidly as competitive differential evaporates. Some vendors will shift to alternative collaboration tools (e.g., IM, teamware, Web conferencing) and find some success in those underpopulated markets. Others will try to parlay their initial success in the spam-blocking market into a broader suite of tools: administration automation and self-service capabilities will be areas of innovation. Small vendors that offer monitoring and reporting tools are most at risk of incursion by IBM, Microsoft, and the console vendors’ activities. This category can be further segmented into vendors that supply suites of tools (e.g., Group Technologies). These small suite suppliers generally have a long history in the market and have grown slowly via acquisition during the past several years (e.g., Tumbleweed with Worldtalk, IntelliReach with Melia, Clearswift with Content Technologies). We believe these vendors will continue to be the leaders in offering a broad spectrum of unified e-mail management services for the next three years, extending services into the archival and supervision markets. Viability concerns will eventually plague this group, and it will face significant challenges from both the console vendors and midsized general-purpose suppliers in 2006/07.
2. Medium-sized, general-purpose vendors (e.g., NetIQ, Quest, Trend Micro): With their capital and sales channels, these vendors will have the broadest market success starting in 2005 (e.g., Quest, NetIQ, SurfControl). Large installed bases will give them the opportunity to up-sell existing customers and broader management portfolios (for databases, directories, IM, browsers, etc.), with broad geographic coverage enabling them to offer additional efficiencies. This category may be further segmented into suppliers with strong antivirus business. These vendors have been slow to recognize the opportunity to expand their presence at the e-mail perimeter into areas beyond virus control. Each of the big three virus firms has rudimentary content-blocking capabilities and is attempting to move into the spam-blocking market via acquisition (NAI bought Deersoft), partnership (Trend OEMs Postini’s heuristics), or in-house development (Symantec). We believe these virus-blocking vendors will be slow to package complete e-mail management services, but they will supply virus and spam signatures, for example, to more comprehensive e-mail management vendors.
3. Larger, general-purpose management console suppliers (e.g., CA IBM, Microsoft, HP): These enterprise console vendors will not follow a common path. We expect lBM and Microsoft to invest heavily in reporting and monitoring services for their respective e-mail platforms, in an effort to boost revenues from slowing, per-seat system revenue growth. We expect IBM to focus mostly on Domino/Workplace monitoring, and we anticipate that Microsoft will do the same with Exchange, while also focusing on perimeter management by adding virus and other hygiene services to its IMS gateway. Console vendors without e-mail systems - BMC and HP - will offer limited functionality (mostly monitoring services) on a good-enough basis to round out comprehensive management portfolios. We expect CA to focus on broader perimeter management concerns, encompassing e-mail, IM, and Web browsing.

We believe a fourth market category will emerge for hosted/managed providers, a category that is currently populated by small suppliers such as Postini, Message Labs, and FrontBridge. Other possible contenders include network equipment suppliers (e.g., Cisco, Nokia) and firewall vendors. Because this market is in a state of flux, care must be taken in procurement. When product functionality is equivalent, companies should opt for larger, multifunction vendors; however, if strong differential exists, a best-of-breed choice is still appropriate. To maximize management efficiencies, companies should plan to migrate to suites of services during the next several years.

Business Impact: The vast importance of e-mail services for enterprises mandates investments in management tools that ensure secure, hygienic, stable, and legal e-mail operations.

Bottom Line: We expect significant change in e-mail management, driven by fundamental shifts in enterprise attitudes toward e-mail services and characterized by consolidation and broader product suites.

META Group originally published this article on 14 August 2003.