A lot of the commentary about Yahoo!'s acquisition of Zimbra has revolved, predictably, around whether this means Yahoo! is now going to move against Microsoft's Office franchise. After all, who isn't gunning for Office? But, although Zimbra provides Yahoo! a platform for doing so should it wish to, I don't see that as the motive. Exchange is a much clearer and more vulnerable target, one that Yahoo! can move against with far greater hope of early and profitable success.
When I chatted to Zimbra's CTO and president Scott Dietzen back in June, he told me the company was making most headway in the education sector. I wasn't surprised to learn this. Educational establishments have a classic two-tier user problem that is poorly served, whether by hosted online email solutions or by classic on-premise email servers. One tier of users — the full-time administrative and tenured academic staff — wants a full corporate email service, while the other tier — all the students and other short-term users — expects the same kind of email experience they get with online email services like Yahoo Mail, Gmail or Hotmail. Zimbra's hybrid model (Web-based but enterprise-class) serves both sets of user well, whether the institution hosts their own server or has Zimbra do the hosting.
Of course, Zimbra's customer base isn't limited to the education sector, and nor is this kind of problem. One of Zimbra's largest corporate accounts is HR Block, which uses Zimbra as a communications platform for its army of seasonal tax professionals. And all enterprises have a large class of what Capgemini, talking about its alliance with Google last week, called "disenfranchised" employees. These are the shopfloor supervisors and clerks, for example — "working in uncarpeted offices," as Capgemini's Steve Jones put it — who don't normally get given email accounts. A hybrid model allows the enfranchisement of such employees, as well as temporary contractors and external partners.
In fact, I wondered when being briefed by Capgemini whether its decision to support Google Apps as part of its desktop outsourcing offering would make any sense at all if Microsoft offered Hotmail accounts as an integrated option alongside Exchange server implementations. Most customers, surely, would leap at such a solution since it would offer a single infrastructure, rather than all the hassle of managing two completely separate stovepipe email applicatons.
This is why Yahoo! has made such a smart move in acquiring Zimbra. There's a real need out there in the market for an integrated offering that does both Web mail and enterprise-class corporate email, allowing organizations to offer Exchange-style functionality alongside Hotmail-style ease-of-use and flexibility. The reason Microsoft doesn't offer it is a combination of a) the difficulty of integrating two systems conceived and designed entirely separately and b) not wishing to cannibalize its Exchange server business.
The latter point is what makes Zimbra — especially now that it's in the hands of Yahoo! — an Exchange killer. Many mid-sized organizations have real problems maintaining their Exchange systems in an era when users are accustomed to effectively limitless storage in their online accounts. They don't have the IT skills or budgets to manage petabyte-sized Exchange archives, especially with the complexity level of doing so in an Exchange implementation. Yet the business managers in those organizations often want to further extend the email user base to new tiers of disenfranchised or casual users.
Yahoo Mail is already popular with many educational establishments, so Yahoo! is no doubt familiar with the market gap opening up in that sector. But what clinched the deal was probably the realization that many other organizations have similar issues with email. Once the Yahoo!-Zimbra combination begins to get traction then of course there may well be a strong case for opening out the Office functionality, too. But that's a far less certain market than the already proven email opportunity. Yahoo! is going after Exchange with Zimbra, not Office.