Blogger: Bill Pray
Earlier this week, Kara Swisher from All Things Digital broke the news that VMware may buy Zimbra from Yahoo! (Exclusive: VMware Likely to Buy Zimbra From Yahoo). I blogged my thoughts on possible buyers for Zimbra from the communications and collaboration market last September when rumors started circulating that Yahoo! was shopping Zimbra. VMware was not on the list.
It would be an interesting move by VMware to move up the stack. There are some synergies that might be beneficial to VMware. For example, if you ask enterprise IT admins who have virtualized Exchange what hypervisor technology they used, the answer will be almost always be VMware. And Zimbra is touted as an Exchange server replacement.
So, VMware’s pitch might be: “Hey, you are already using us to virtualize your e-mail servers to gain a better ROI for your messaging environment, how about replacing that e-mail server with a less expensive alternative that will work even better with our virtualization technology? Oh, by the way, your users won’t notice a thing because our e-mail server works just like the one your replacing.”
However, what about software-as-a-service e-mail? The anticipated direction that most thought Yahoo! would take Zimbra was to turn it into an enterprise-class SaaS e-mail / collaboration offering that leveraged Yahoo!’s substantial infrastructure assets. While VMware certainly could also take Zimbra this direction (and would have to given the steam that is building behind enterprise-class SaaS e-mail), it might already be too late. Cisco, Google, IBM, and Microsoft are well down the path to building out the infrastructure and services to economies of scale that deliver lower price points and profitability. In fact, the price war is in full swing, as evidenced by last fall's activities from IBM’s price for LotusLive iNotes, to Cisco's price for WebEx Mail, and Microsoft’s lowering of BPOS prices. VMware would have to play catch-up in a market that is moving fast – a potentially expensive bet that might not pay off given the caliber of the competition.
The other option is that VMware can continue to white-label Zimbra, as Yahoo! is doing, to third-party hosting providers. While this will continue to work for awhile, the price war will eventually make it very difficult for any third-party hosting provider to compete in a market that Cisco, Google, IBM, and Microsoft are carving up with their economies of scale.
For an on-premise e-mail server play, a Zimbra acquisition by VMware has some interesting possibilities. But for enterprise SaaS e-mail, VMware might be too late to the game.