VMware Buying Zimbra – My Initial Thoughts

According to Kara Swisher of AllThingsD, VMware is close to buying Zimbra, open source collaboration software, from Yahoo.

Yahoo is close to selling its Zimbra unit to VMware, according to several sources close to the situation.

Though nothing has been made official yet by either parties, the news seems to be credible. Zimbra was one of the few open source pioneers who showed the world that it is possible to cash out big with the open source baggage. Their Zimbra collaboration suite, available in the form of commercial network edition and open source edition along with some hosted offerings and Zimbra desktop software, is an enterprise grade suite that competes directly with Microsoft Exchange. The company was acquired by Yahoo for 350 Million in 2007 but no one had any clue about what Yahoo will do with this purchase. Now it appears that even the folks in Yahoo had no clue about it either. We have been hearing for sometime now that Zimbra is on the chopping block at the Yahoo. This news, if true, will put a closure to that saga.

After hearing the news, I had some initial thoughts and I am just listing it out here. Feel free to jump in and add your thoughts in the comments section.

• My first reaction was “why?”. But as James Urquhart pointed out in Twitter and as Matt Asay discussed in one of his recent posts, infrastructure players cannot be competitive by playing the game just at the bottom of the stack. They need to go up the stack all the way to the applications. Vmware moved up to PaaS with the Springsource acquisition and Zimbra can give them a leverage at the application level. Plus, Zimbra being a software in the traditional sense can fit well into the VMware’s (private) cloud strategy.
• My next immediate reaction was “hey it is an open source software and what will VMware do?”. In fact, when Yahoo bought Zimbra, even though I was totally clueless about Yahoo’s strategy, I was excited because Yahoo is one of the few companies out there who respect open source. We cannot say the same about VMware. Within moments, I was not all that worried about it because I have strong faith in the power of open source licenses and Zimbra will do just fine under VMware. Well, VMware has already established their open source credentials to a certain extent and they just bought Springsource few months back. We were ok with it, Right?
• If VMware is serious about applications part of the cloud stack, this is a good first step and I am expecting them to go on a buying spree in the next 2 years. Will one of the open source BI vendors be next?
• How does this affect the relationship between VMware (and with EMC, of course) and Microsoft? Zimbra will directly compete with Microsoft Exchange offerings. Already, VMware and Microsoft are having a competition in the Virtualization market. This opens up another front in the war with Microsoft. It will be interesting to see the impact on Microsoft-EMC relationship too.

These are my first thoughts after hearing the news. In the future, I will do a deeper analysis if the rumor turns out to be true. Anyhow, Zimbra didn’t have a future with Yahoo and it is better they end up with a company that has some serious cloud plans. It will be interesting to watch the path VMware takes in the cloud era.