Zimbra notches 100 percent growth
Lost in the news of Zimbra's release of version 6.0 of its collaboration suite is the importance of one very big number: 50 million. That's how many paid mailboxes Zimbra claims now, a number that puts it within spitting distance of IBM Lotus Notes (approximately 145 million paid mailboxes) and Microsoft Exchange (approximately 175 million paid mailboxes). Whatever the truth to rumors that Zimbra is up for sale, Zimbra is an appreciating asset for Yahoo, not a depreciating one.
For one thing, it's important to consider just how explosive this growth has been. In January 2009, Zimbra was at 20 million paid mailboxes. By March, that number had jumped to 40 million paid mailboxes, perhaps a consequence of Comcast mailboxes coming online. (Comcast chose Zimbra to power its Web mail service in 2007.)
That's a lot of growth in a very short period of time. Zimbra appears to have more than doubled its business in the past year.
In fact, if you track the paid-user data for Zimbra, it's very apparent that Zimbra's momentum has been increasing since its Yahoo acquisition, not decreasing.
Such momentum is built on a vibrant, growing community. Zimbra has roughly 10,000 active members on its forums, growing from 5,000 total forum registrations in 2006 to more than 20,000 in December 2008, the last date for which I have accurate data.
At the time of its acquisition in 2007, Zimbra was generating approximately 30,000 downloads per month, a number that has held constant even as a greater proportion of its community elects to pay for Zimbra's Professional Edition.
Yahoo may not know whether it wants to be an enterprise software company (Hint: it doesn't), but Zimbra definitely stands out as an enterprise software product. While the company used to mainly find traction with universities and SMBs, its customer list now includes companies like Bechtel, Century21, H&R Block, Raytheon, and more.
Perhaps as a sign of this growing enterprise clout, Zimbra has caught the eye of Red Hat, which works closely with Zimbra, most recently jointly selling to the Peruvian government.
ZDNet's Larry Dignan may be right in suggesting that Zimbra's news appears to package the company for a sale but, again, even if so, it's clearly because Yahoo doesn't know the way to sell enterprise software, and not because Zimbra can't. If Zimbra continues to grow as it has, within a year it will be taking significant market share from industry leaders IBM and Microsoft.
Zimbra has already caught Microsoft's attention. With Zimbra's 50 million paid users, apparently Redmond is not the only one to notice the company.
Update @ 3:29 Pacific on September 30, 2009:
It's true, as reflected in the comments, that at least some of this growth is due to more and more Comcast subscribers coming online. Surely such users are, on average, not as active as IBM or Microsoft email customers, which tend to be corporate users. Point taken.
But I think this is also a complaint that makes less and less difference as a greater share of Zimbra's customers are enterprises, as reflected in its recent Bechtel deal. There are only so many Comcasts (though I doubt Zimbra would be disinclined from signing up more), but that's not the future for Zimbra, anyway. Enterprises are.
Hence, it may be momentarily inaccurate to compare apples (Zimbra) with oranges (IBM/Microsoft), Microsoft's own internal positioning against Zimbra, as linked to above, suggests that Zimbra's competitors recognize the threat and don't pooh-pooh its numbers as "just Comcast."
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
I have never logged into my comcast email account, nor do I intent to. From a quick sample of my friends and colleagues who have comcast, none use their comcast accounts.
So, am I a 'paid' mailbox?
By the by, instead of relying on hearsay, why not log in and use the creature? I have, and as far as webmail rigs go, it's fairly decent (Comcast could stand to trim a lot of the flash and JavaScript out of it, though...)
Exchange 2k7 Enterprise will set you back $4k/server, plus $35/seat/year for CALs. In a 2,000 user org w/ one mailbox, one hub transport, and one edge transport, that's a nice fat figure of $82k/year for enough 'oomph to keep 2,000 users happy in an enterprise role. Zimbra by contrast is only $28/seat self-hosted (CAL and server licenses included), costing only $56k/year.
I'm guessing that it's well worth looking into, and intend to do just that come the next refresh (unfortunately, I still have to eke out some sort of an ROI on our recent Exchange buy...)
What is Zimbra's revenue and profit growth? That would be the real story, CNET. Or at the very least, please compare apples to apples.
Not really - a large percentage of an enterprise's users (likely the majority in manufacturing) don't really use their Exchange or Notes email (if at all), and yet the company still has to buy the CALs for them if an email address is provided (as well as for every collective mailbox that may or may not see usage, but you can't get rid of them, etc).
Long story short, it's a wash either way.
The reason is deals like Comcast's are usually structured closer to a "site license" than than a true per-user fee. Beyond a small proportion of the users, the incremental per-user value of the license is near zero.
That's why Zimbra's numbers are bogus. The growth curve in the number of "paid users" is likely exponentially higher than actual revenue growth. The metrics are no longer simply correlated. Zimbra might have "100 percent" user growth recently, but what is the corresponding growth in revenue? Net income?
There's a reason why Yahoo is willing to let Zimbra go, for a significant loss from what I've read.
...and Microsoft/IBM suddenly wouldn't do site licensing or bulk discounts for similar-sized customers? I'm willing to wager that a similarly large customer - say, the US gov't - or even smaller clients (e.g. the Intel Corporation) don't pay per-seat licensing of Exchange either. Your assertion without mentioning similar-sized proportions makes your own argument bogus.
"The growth curve in the number of "paid users" is likely exponentially higher than actual revenue growth."
That would be true in any bulk licensing situation (see also Microsoft EA licensing vs. it's SBE's onesie-twosie licensing). And yet, I don't see Microsoft putting Exchange up for spin-off anytime soon. ;)
"There's a reason why Yahoo is willing to let Zimbra go..."
...wouldn't have anything to do with recently becoming economically dependent on the maker of Zimbra's biggest competitor, now would it? Nah - that couldn't possibly be it... after all, they planned on selling the thing off for years before Microsoft showed - oh, wait, no they didn't. ;)
One of my clients (top 20 bank in the world) has over 70,000 employees -- same order of magnitude with Intel -- and I can assure you they effectively pay "per-seat" licensing and not a "site" type license. There is a huge difference between volume licensing (when an enterprise get deep discounts for committing to large purchase levels) and an "all you can eat" type of license where beyond a relatively small proportion of users, the incremental cost per user drops to near zero.
Large enterprises and governments are "bread and butter" businesses for Microsoft. To suggest they would do Zimbra-type deals in this space is nonsense. Microsoft, HP, IBM, etc., and yes even Apple didn't became successes because they gave the store away like Zimbra did.
Of course, Zimbra had to show a "win" -- even when costly -- so it jumped on the Comcast deal. Zimbra's purchase was Jerry Yang's failed experiment, and that's why it's being jettisoned, not because some childish fanboy-lets-blame-Microsoft reason.
- by jtjt145 September 30, 2009 3:30 PM PDT
- Yep, the new management at Yahoo does not seem to have too many ideas in how to make money with 'their' open source products.
- Like this Reply to this comment
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(13 Comments)Other recent decisions by the new Yahoo management also show that they have no real idea of getting their own creations to make money for them. Instead they cede control over strategic items like their search engine to the waning 'also-ran' from Micro$oft, earning them a few bob.
It must feel cozy, not having to think yourself, and letting the Redmond guys try to run the show for you.
Nope, long-term decisions is not their strengths!
And no, its probably not the best of time to look at Yahoo shares, probably not for a while.