Cisco announced yesterday that it is acquiring Mountain View-based email and calendaring company PostPath for $215 million. First and foremost, the company’s product should present a challenge to Microsoft’s dominant Exchange product in providing corporate e-mail and scheduling functionality. While Outlook is still firmly entrenched as the corporate productivity program of choice in corporations, Cisco will be trying to push out Microsoft out of the corporate IT server room, extending Cisco’s reach beyond just networking gear.
PostPath will help Cisco become a bigger player in the corporate world, as it offers a drop-in replacement for Microsoft Exchange, and PostPath’s Lean Configuration allows companies to do more with less hardware – PostPath claims that it can save companies around 75% while delivering a much faster environment. By relying on reliable open source components such Linux, Samba, and Postfix, PostPath is able to reduce the licensing requirements for its customers.
One of the big benefits for Cisco is that this acquisition fits within the company’s acquisition strategy to beef up in the collaboration realm. As Cisco’s Doug Dennerline writes in a Cisco blog:
Today’s acquisition of PostPath is part of our commitment to create a comprehensive cloud-based collaboration platform. By offering an on-demand version of the PostPath solution, we can provide flexible, cost-effective email and calendaring integrated with our collaboration portfolio of Cisco Unified Communications, WebEx and Business Video.
Characterizing this acquisition as just a move by Cisco into greater collaboration (particularly post its WebEx acquisition) is missing the big picture in my view. Microsoft started the user’s desktop and has pushed outwards to the server room and is now looking at more cloud computing initiatives. Meanwhile, Cisco started from a strength in networking equipment (switches and routers) and is looking to win a bigger piece of the enterprise market at the expense of Microsoft. While the old boundary lines were Miicrosoft does software and Cisco does the hardware, those lines are becoming increasingly blurred as corporate needs become increasingly complex and as software running on commodity hardware is now capable of replicating the capabilities of specialized hardware.
In this vein, a number of interesting points arise from this acquisition:
- A greater profile for PostPath could hurt Microsoft as the product does arguably provide for a lower total cost of ownership. This cost differential will be particularly important for the SMB market and in a challenging macro environment.
- With Exchange between an important intersection point in the corporate world for things like push e-mail to smartphones, interactions with BlackBerry servers, corporate backup and DRP plans, compliance, web meetings, remote access, and unified communications, this acquisition gives Cisco a lot more control of how these services interact. I would expect that Cisco will now have more leverage in trying to establish standards on how these tools interoperate going forward. For example, standardizing how a Telepresence video call is established over the Internet to a corporation using a Tandberg video system is important as the video calling ecosystem builds out.
- The unified communications aspect of this is important as Cisco previously had to sell a separate collaboration box to companies, while Microsoft has the ability to merge this functionality into Exchange. Look for Cisco to build out a unified communications-enabled PostPath server in the future.
- Smartphones in the enterprise appears to be expanding within corporations as BlackBerry and iPhone applications continue to be built out. One of the advantages that Microsoft was touting was that it was able to do push e-mail through Windows Server and no extra cost. With Cisco now selling an Exchange replacement and smartphone vendor neutral, PostPath could over time support push e-mail and calendaring to BlackBerry, Nokia, Microsoft, and iPhones natively. How good does the deal between Cisco and Apple look right now in “increased iPhone compatibility”? I wouldn’t be surprised to see Cisco acquire a company within the push-email space, such as Visto.
- Security is another underappreciated aspect of this deal. Microsoft’s Network Access Protection (NAP) and Cisco’s Network Admission Control (NAC) are the two companies’ efforts in trying to provide system-level security for corporations. While the initiatives seem to intereopate at some level, owning more pieces of the pie is critical in getting the components to work properly together. For Cisco, the Exchange server was its Achilles’ Heel as it had to rely on Microsoft’s security to make this component secure. Now with PostPath, Cisco can now push a product which isn’t based on Microsoft software – the added bonus is that with a small market share at present, PostPath won’t be subjected to as many security attacks.
In summary, this acquistion by Cisco isn’t expensive by any means, and should allow Cisco to more effectively compete with Microsoft in the enterprise at a time when the needs of corporation are expanding to be more wireless, decentralized, and eventually more reliant on cloud computing and virtualization. While Google is pushing to bring corporations into the cloud computing world today, I like this acquisition from Cisco as it will provide a solid platform for Cisco to sell a suite of new products, including video conferencing (TelePresence) and remote collaboration (WebEx).
