Zimbra customers, on an emotional roller-coaster ride since it was acquired by Yahoo, welcome VMware’s plans to buy the open-source e-mail, calendar and collaboration software vendor.
Many of them were vexed when Yahoo snapped up Zimbra for US$350 million in September 2007, concerned that the Zimbra suite might wilt and disappear due to Yahoo’s inexperience in the enterprise software market.
Months later, when Microsoft launched its hostile attempt to buy Yahoo, the uncertainty worsened among many Zimbra customers who had migrated away from Exchange, couldn’t afford it or simply didn’t like it.
Although Microsoft withdrew its offer for Yahoo, the companies eventually struck a search advertising and technology deal that again brought Microsoft into the picture for Zimbra customers.
Then in September of last year, rumors started floating that Yahoo CEO Carol Bartz was actively seeking a buyer for Zimbra, which again caused uncertainty over the future of the suite.
This week, customers who felt uncomfortable about Yahoo owning Zimbra let out a sigh of relief when VMware, a major player in the virtualization software market, announced its agreement to buy Zimbra. Their investment in the Zimbra suite will be more secure with a parent company that is an enterprise software vendor and views Zimbra as a key part of its portfolio, customers said.
“With VMware buying Zimbra I feel much more confident,” said Cedric Halbach, CTO at The Metropolitan Companies, which has used Zimbra successfully for companywide e-mail for about four years. “The Zimbra software is great, but it was in the wrong place in Yahoo’s hands and that made its future insecure for me.”
Prior to implementing Zimbra, The Metropolitan Companies used Exchange, but ditched it after finding it too expensive and unstable. Thus, Microsoft’s attempt to buy Yahoo, and the search deal the vendors later struck, concerned Halbach.
“We absolutely weren’t going back to Exchange. We’ve used it in the past and had too many problems with it, and it is very expensive once you get into the larger rollouts,” he said in a phone interview.
“Even now with Microsoft as a Yahoo partner, there’s still a gray haze in the background that I’ve been aware of and keeping my eye on, kind of on a wait-and-see [mode] while still using Zimbra, which is excellent, very powerful and reliable,” Halbach said.
Zimbra has worked so well at the company for its about 200 users that Halbach and partners, including the owner of The Metropolitan Companies, recently launched a startup venture called Enterprise Technology Services to provide the Zimbra suite and other software and services on a hosted basis for small businesses.
The Zimbra suite is in use at more than 150,000 organizations, with a total of more than 55 million mailboxes. It can be installed on customer premises or accessed via the cloud from Zimbra hosting partners. VMware has said that Zimbra will further its “mission of simplifying IT.” Zimbra will also beef up VMware’s offerings to its vCloud hosting partners, by adding a software-as-a-service (SaaS) component to its existing IT infrastructure and application-development-platform hosted services, according to VMware.
Matthew Day, IT manager at Langs Building Supplies in Brisbane, Queensland, Australia, has renewed the company’s Zimbra contract from year to year since the Yahoo acquisition out of uncertainty for the suite’s future.
Now, after learning of VMware’s intention of buying Zimbra, Day feels relieved. If the VMware acquisition closes successfully, Day will not hesitate to renew his company’s Zimbra contract for a longer three-year period for its about 400 end-users.
“There were a number of ways the road could have gone for Zimbra and the team and I feel the VMware road is a good one to be traveling down,” he said via e-mail.
Zimbra customers like Day like what they perceive as an aligned focus between it and VMware.
“VMware is well positioned to understand the needs and desires of the Zimbra product and its customer base. I feel we will see some convergence between the two business divisions bringing interoperability between Zimbra and VMware products,” Day said.
L. Mark Stone, CIO at managed services provider Reliable Networks, a Zimbra customer as well as hosting partner, views the acquisition as potentially positive, but warns it could sour if VMware becomes impatient for revenue and makes decisions focused on short-term results, as it seeks to diversify beyond virtualization.
“If VMware builds on Zimbra’s brand and supports their entrepreneurial culture, the acquisition will be good for Zimbra partners, customers and other stakeholders,” Stone said via e-mail.
“Zimbra is a great SaaS offering, but if VMware tries to over-monetize Zimbra too quickly, that will be a problem,” he added.
Stone warns that VMware must be aware that Zimbra’s competition has improved greatly, including Exchange, whose 2010 version he calls a significant enhancement over Exchange 2003.
“If VMware ‘gets’ that Zimbra is the tail which will wag the VMware dog as VMware tries to penetrate the IaaS [infrastructure as a service] and SaaS markets, then Zimbra’s best days are still ahead of it,” Stone said. “If VMware conducts itself with the hubris unfortunately all too common with buyers, then this deal will fail, just like too many other acquisitions.”
Bill Pray, an analyst at Burton Group, notes that VMware has been a popular choice for virtualizing e-mail servers, so being able to market its own e-mail system for on-premise deployments will make sense. Zimbra also stands to gain.
“For Zimbra, getting out from under the Yahoo umbrella and going to a parent company that can execute on an enterprise strategy with them will definitely be a bonus,” Pray said.
In addition, Zimbra gives VMware another tool to sell, said Rebecca Wettemann, a Nucleus Research analyst. “VMware is selling to the same person who decides what calendars and mailboxes applications the organization uses. VMware is firmly in the IT decision-maker box,” she said.
Yahoo benefitted from integrating some Zimbra technology into Yahoo Mail and Yahoo Calendar, but Zimbra never became a core service and as such wasn’t a strategic fit for Yahoo, whose revenue comes mostly from advertising in its consumer online services.
“Yahoo has been trying to divest itself of noncore businesses, so selling Zimbra certainly makes sense,” said Lydia Leong, a Gartner analyst.
Still, Yahoo deserves credit for not wrecking Zimbra, customers said. “Yahoo did less damage to the Zimbra brand and product than I thought they would, so I am grateful for this,” Day said.
During its two-plus years under Yahoo, Zimbra’s sales grew significantly, and it stayed on a healthy schedule of upgrades.
“Yahoo’s management of Zimbra was outstanding. Yahoo pretty much left Zimbra alone, didn’t starve it of capital, force their culture down Zimbra’s throats nor milked Zimbra for every ounce of profits they could have,” Stone said.
Time will tell whether Zimbra thrives as part of VMware. In the meantime, Zimbra customers are hopeful.
“This time around I am very optimistic. When I initially heard the rumors and then the official announcement, it did make me smile,” Day said.