Zimbra: Yahoo Wasn't a Fit

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After spending $350 million and two years of effort, Yahoo officially announced yesterday that it was selling its open source Zimbra e-mail collaboration unit to VMware.

So why the change of heart?

In conversation with InternetNews.com, top executives from Zimbra commented on their time at Yahoo and why a parting became necessary. While having an e-mail collaboration vendor made sense for Yahoo two years ago, today's Yahoo just isn't the same company -- and it doesn't have the same goals.

"Clearly, as the macroeconomy changed and as the Yahoo situation changed from the Microsoft stuff all the way to CEO changes, they looked at their focus and they want to be a consumer starting point," Zimbra General Manager Jim Morrisroe told InternetNews.com, referring both to Yahoo's deal to outsource its search engine to Microsoft (NASDAQ: MSFT) and its changes at the top that in early 2009 saw former Autodesk exec Carol Bartz appointed to the CEO post, replacing Yahoo founder Jerry Yang.

"Our enterprise software market and momentum with big cloud providers wasn't necessarily a fit as much as it was," Morrisroe said. "They did everything we needed to help us grow our business and help us satisfy customers, but it just wasn't a fit."

In the time since Zimbra Collaboration Suite (ZCS) 6 release came out only in September 2009, representing the first major update to Zimbra's flagship platform in 18 months. Prior releases of Zimbra had been emerging on a faster timeframe, often every six months.

"I think clearly our goal is to continue innovation at a quicker pace than every 18 months," Morrisroe said. "We will continue to invest a ton in R&D and I think we will increase that as part of VMware."

As part of the VMware (NYSE: VMW) acquisition, Morrisroe noted that nearly 100 percent of the Zimbra team will be moving from Yahoo to VMware. There are, however, two notable exceptions: Zimbra founders Scott Dietzen and Satish Dharmaraj won't be among the core team joining the new company. Both had joined Yahoo after the 2007 acquisition, but each left the company over the course of the past year.

Further changes may yet be in store as well. As part of Zimbra's 2007 Yahoo acquisition, much of Zimbra's source code had been relicensed to the Yahoo Public License from a Mozilla plus Attribution open source license. With the pending move to VMware, it's not clear yet whether Zimbra will be relicensed again under a different open source license.

"In the short term, the goal is to bring the business over and not to make any changes around the business," John Robb, vice president of marketing and product management, told InternetNews.com. "Going forward, everything is up for consideration, and that's an area where we definitely want to look at what the right thing is to do going forward. Stay tuned -- that's definitely an area of interest for us."

Despite some areas of uncertainty, the move to VMware is seen as a very positive one by Zimbra execs that will help to fill a need in their overall strategy.

"Our 2010 plan was all about global distribution, including sales, marketing and professional services," Morrisroe said. "In that way, this acquisition will be amazing for the product: The footprint of VMware is gigantic compared to what we've had, and enabling that channel to sell the product will pay huge dividends for us."

"We have all the technology components to compete with whomever -- be it Google or Microsoft Exchange -- so now it's about coverage on both the sales and services side."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the internet.com network.

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