Arms Merchant for the Next Big War

One of the great things about living in San Francisco is the proximity to the tech startup community.  It's pure, uncut optimism. 

A few days ago I was fortunate enough to visit with a very hot startup called Zimbra, located in San Mateo.  It is being run by the former CTO of BEA, Scott Dietzen. 

Zimbra is Web 2.0 Exchange.  It's all Ajax, it can be delivered either on-premise or off-premise, its open api's enable some eye-popping mashups, and it leverages an open source development model.  What is cool is that Zimbra was developed after the creation of the Web which means it can take advantage of many nifty standards, technologies and techniques.  Some would say this creates a "second mover advantage."  Why?  Here's a shocking stat: Exchange's code base is 10 years old.  This means that the genesis of Exchange included requirements to handle things like PROFS, a mainframe based email application. Exchange was built before many important web-based languages and concepts existed.  In a nutshell, Exchange was built in 1996 with one eye on serving their client/server requirements while also anticipating what the web was going to do to messaging and collaboration - an impossible task.   

Zimbra, by contrast, was developed with web concepts at top of mind.  Careful consideration was given to how Web 2.0 enhances things like sharing.  It is far simpler to have multiple personal calendars - one for work, one for personal, one for your avocation... and then share them with different constituents.  I know something like this is possible in Exchange but in Zimbra it is a breeze by comparison to set up and right now appears more powerful.   

Zimbra lets you do eye-poppingly cool things with emails and contacts that should have been features in Exchange ages ago.  For example, hover your mouse over an address and a map pops up.  Or hover over a flight number and see that flight being tracked by www.flighttracker.com.  And that's the heart of what Zimbra is - it is a much more flexible, simpler, cooler, and better looking Exchange.  However, isn't this strength a weakness?

I will not argue that Zimbra is cooler than any other mail package out there.  It is.  I want it for myself.  But can't all this coolness find its way into Exchange?  I am not a technical guy, but the answer I gleaned was along the lines that Exchange probably could do it, but it's much less elegant and inflexible.  Hmm. 

And then you realize that is not the point.  Zimbra is not out there to unseat Exchange.  It is out there to provide the same basic services in a much more natural, intuitive fashion... priced as a service.  While they are still in the early stages of their distribution strategy, I found it very interesting to notice one of their strategies is to partner with telcos.

Suddenly I knew why Microsoft should care, and why Google will care.  With Microsoft launching Office Live (a hosted set of services for SMB's, including email), they positioned themselves to capture the customer at the point of conception.   Objecting to this move, interestingly, are the telco's and ISP's.  The real dollars lie in the services delivered through the pipes of the telco, and they will be God-damned if they let Microsoft saunter in and capture that revenue without a fight.

The arms merchant to this potentially huge battle then becomes, among others, Zimbra.  Now British Telecom or Verizon can not only offer the bandwidth but also a compelling, easy to use service that will win heart and mindshare from anyone on the other end of the pipe.  At the very least, it is legitimate competition to Microsoft.

Considered in this light, Zimbra becomes quite interesting.  And one would think that Google, with their apparent strategy to offer a web-based version of all things Microsoft, would take a long look at Zimbra.  Competition for this space include Scalix, PostPath, and Semaphor.

In the mean time, I imagine the gang at Zimbra will focus on fleshing out the core feature set of the product, and enhance the collaboration/sharing powers.  If they can convince the large, medium, and small network plays to resell their stuff, we'll have another success story, and another reason to be optimistic about Silicon Valley.

Comments

[Al Sargent]

Nice post. I wouldn't underestimate how hard it would be for Microsoft to replicate Zimbra's features. Hypothetically, yes, Microsoft could build something like Zimbra. But realistically, the chances of this happening are quite low.

For example, look at Hotmail, a relatively simple email service built on newer "Web 1.0" standards than Exchange. Microsoft hasn't significantly changed it in years despite competition from Yahoo and Google. Hotmail contains numerous annoying issues -- poor spam filtering, limited address book -- that could have been addressed years ago if Microsoft had the will and executive mandate to do so.

[randolfe]

I agree that it is somewhat unlikely we'll see Outlook recreated as a "Web 2.0" dynamic app anytime soon. It is important to separate Exchange from Outlook in this analysis, however.

Exchange is a proprietary mail server system which is built upon, and provides access via standard protocols (POP, IMAP, SMTP). But Exchange's killer feature is its proprietary protocol which enables Outlook. And Outlook is the killer app. I wouldn't underestimate the inertia that must be overcome to dethrone Outlook as the embedded office communications and scheduling app. Great alternatives have existed from the days of pure client-server, when Outlook sucked, until today; but Outlook continues to gain share. It's a de facto standard and enjoys the benefit of ubiquitous training and learning curve.

Add to that the big Telecoms push for a 2-speed internet; which so far looks a bit more likely than not. Such will favor MSFT, not upstarts. MSFT has the resources to pay the bandwidth fees, the depth to negotiate with the likes of T and VZ, and the product that the majority of business customers will be demanding for the next many years.

If the telecoms try to go it alone by incorporating something like Zimbra, they will kill it. Telecoms are perhaps the best choice of management if you're looking to suffocate a promising new technology.

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