Rumor: VMware Buying Zimbra Open Source Email?

Zimbra, one of the best-known providers of open source email, may soon have a new owner. Rumors are swirling that Yahoo plans to sell Zimbra to VMware. If true, here are the implications for VARs and managed service providers — particularly in the SaaS (software as a service) market.

Zimbra generates roughly 60 to 70 percent of its revenue from channel partners, and roughly 450 of those partners are hosting Zimbra’s open source email for customers. Zimbra VP of Business Development Andy Pflaum revealed those facts and figures in this September 2009 FastChat Video with The VAR Guy:

Evolving Interests?

Yahoo acquired Zimbra in 2007 for about $350 million. And Zimbra’s channel partner strategy has appeared promising, according to The VAR Guy’s Open Source 50 report. Still, Yahoo has been rethinking its business strategy amid fierce competition with Google and Microsoft Bing. Rumors of a possible Zimbra sale have circulated for several months. The latest chatter involves VMware possibly buying Zimbra, according to AllThingsDigital.

Competitive Landscape

If VMware gets its hands on Zimbra, it could trigger more intense competition between Zimbra/VMware and…

• …Google Apps in the university market.
• …Microsoft Business Productivity Online Suite (BPOS), which includes hosted Exchange
• …Open Xchange, another fast-growing open source email provider that works with numerous SaaS channel partners

But that’s not all. Zimbra could be a key player in the emerging showdown between VMware and Red Hat…

• At present, Zimbra is a close partner with the Red Hat Enterprise Linux team, Alfresco and other open source companies pushing into key verticals like the U.S. federal government.
• But Red Hat’s big push for 2010 is Red Hat Enterprise Virtualization (RHEV) on servers and desktops.  RHEV essentially positions Red Hat against VMware.

If VMware pulls the trigger and buys Zimbra — at the right price — it could trigger a reset for how open source companies are valued, and how their channel partner programs are designed. The VAR Guy will be watching.