VMware jumps further into SaaS with Zimbra

Last year I wrote about VMware acquiring SpringSource, a Java development and application server company. In a further (not completely surprising) development, VMware announced this week it would buy Zimbra from Yahoo! for some $US100 million.

Zimbra is a messaging and groupware server that sports a nice rich Web interface. See Zimbra.com for more details.

In a series of swift acquisitions VMware has gone from system infrastructure and management provider to application server to application vendor.

Zimbra is a Java application and uses the Apache Tomcat application server, so it is a technology fit with the SpringSource.

Make no mistake about it. VMware’s direction is good for the software industry.

Unlike Yahoo! that has struggled to compete with Google and Microsoft in its consumer offerings and has not driven towards offering hosted SaaS for business (think Google Apps and Live@Edu) with anywhere near the same tenacity.

At Yahoo! Zimbra was its enterprise software offering. Now it’s gone, who knows what direction Yahoo! will take. Perhaps a huge promotion of its existing small business e-mail service is in order?

The fact that Yahoo! lost Zimbra doesn’t mean it’s not capable of developing an enterprise-grade e-mail and groupware service (delivered as SaaS) like Google, it is.

A few years ago there was a lot of buzz about how “desktop like” its new generation Web-based e-mail service is. Yahoo! might be thinking that large-scale multitenancy is its heritage and therefore its future.

Whatever Yahoo! is thinking it needs to act fast. Its relevance is under threat from an onslaught of cloud computing providers. Google, Microsoft, IBM, Amazon and a whole host of independent SaaS vendors are monetizing a market that Yahoo! has the infrastructure and know-how to enter.

Interestingly, when Yahoo! snapped up Zimbra in 2007 it paid $US350 million. At the time I doubt I was alone in thinking that was way overpriced. A few years later, after what should be an increase in value, VMware gets it for $US100 millon. Where did the $US250 million in value go?

VMware, on the other hand, can and will aggressively compete with the groupware players. It knows how to sell enterprise software, and purchases like this indicate it is prepared to fight the challenge Microsoft, Citrix, Novell and others are imposing on its virtualisation turf.

The acquisition also brings back memories of Cisco’s purchase of PostPath (similar to Zimbra and there was talk of it using some of the open source components). Cisco, the infrastructure provider – and VMware partner – has added a groupware SaaS offering to its portfolio.

Finally, as expected there is already talk about whether VMware will kill off the open source version of Zimbra.

I doubt it will. If anything Zimbra is a good example of a “shareware for business” software model. People are free to download, use and even modify the open source version but if you want professional support and advanced features (Exchange compatibility being the big one) then you pay for them.

This a model VMware has used for years with its hypervisor products. Besides, if Zimbra’s numbers are to be believed – 50 million paid mailboxes and counting – it should be profitable.

Where to from here? That’s anyone’s guess. VMware has now staked its claim as a mainstream SaaS vendor and anything that runs on an open source Java stack is fair game.