Gartner MarketScope for Email Systems, 2011

Research Publication Date: 22 June 2011

ID Number: G00213356

MarketScope for Email Systems, 2011 Matthew W. Cain

There was unprecedented turmoil in the enterprise email market in the past 12 months, which saw business failure, market consolidation via acquisition, and a continued push from megavendors to transition the market to a cloud-based platform.

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WHAT YOU NEED TO KNOW The email market is in flux, creating opportunities and challenges for organizations transitioning their messaging strategies. An email system is typically used for a decade before suppliers are changed: organizations should apply significant due diligence in selecting an email system, given the criticality of email to their overall health. Buyers should avoid the popular notion that email is a commodity, easily sourced from a variety of suppliers.

MARKETSCOPE The last 12 months of activity in the email market have been as tumultuous as any equivalent period over the past 30 years. Two of the regular participants in our MarketScope report — Novell and Mirapoint — were acquired, and, after investing $250 million over two and a half years to deliver a cloud email system, Cisco abruptly pulled out of the market. Interest in the cloud model continued to soar, but actual deployments did not match interest levels. The pending arrival of Microsoft's new Office 365 cloud platform (which largely froze interest in the existing Exchange 2007 cloud service) and overall wariness over cloud security and manageability stymied a more aggressive uptake. We continue to maintain that cloud email is in its infancy — accounting for no more than 4% of the overall market — but that longer-term it will be an attractive provisioning model. For the time being, however, our guidance is that most organizations would be better off with one more round of on-site email (via a version upgrade, in most cases), which will be good until 2014 or later, at which time cloud email services should be suitably robust for most organizations. Other notable highlights in the email market over the past dozen months include the following: Research In Motion (RIM) said it would offer free BlackBerry Enterprise Server (BES) services to Office 365 customers, and introduced its own BES-specific MDaemon email system, which it acquired when it bought Alt-N in late 2009. MDaemon is targeted mostly at small companies. Facebook delivered a new, rather uninspired, email service that has the potential to take a significant share of the consumer market and change the way users think about email. IBM released a cloud version of Notes/Domino called LotusLive Notes. Microsoft delivered a long-awaited version of Outlook for the Mac. Google created an Apps Marketplace for Gmail and introduced an email continuity service for Exchange users. More general trends in the market include a growing interest in hybrid deployment models where some mailboxes live on-premises and some in the cloud, and heightened awareness of user segmentation models, where different email services are offered to users based on need, as opposed to offering the same email service to all users. Rumors of the death of email continued apace but we maintain our position that social media and email are on a path of co-evolution and convergence, rather than a zero-sum game. Tougher to squelch has been the insidious notion that email is a commodity, which we believe leads to an underestimation of the complexity of email, and hence a lack of due diligence in evaluating cloud email services. Email continues to reflect broad industry trends, including the evolution of the cloud market, consumerization, virtualization, the rise of social computing and megavendor battles.

Publication Date: 22 June 2011/ID Number: G00213356 © 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Market/Market Segment Description This document addresses email systems, which at the most basic level are composed of three core elements: a message store, a directory and a message transport mechanism. Email systems also typically include calendar services and an email reader (client), but not in all cases. This MarketScope covers both cloud and on-site email services. For Microsoft, however, the rating only applies to an on-premises deployment, not its cloud email service.

Inclusion And Exclusion Criteria There are over 25 email vendors in the enterprise market worldwide, making it difficult to evaluate all participants. In selecting vendors to participate in this comparative analysis, we identified the eight vendors most frequently asked about in our calls with clients. The primary focus is on vendors that sell to the enterprise/government markets. We excluded vendors that focus exclusively on the Internet service provider (ISP)/communications service provider (CSP) markets, such as Openwave and Oracle (with its Sun Java System Messenger Server). Oracle's Beehive is not included because there have been no signs of its success in the enterprise email market. Given fierce competition for this enterprise market space, some vendors — such as Open-Xchange, Xandros/Scalix and Critical Path/Mirapoint — are increasingly pursuing opportunities in the ISP/CSP market, and, as a result, get lower marks here, given our focus on the enterprise.

Rating for Overall Market/Market Segment Overall Market Rating: Strong Positive Email/calendar systems are the most important communications channel for enterprises, and deliver a reliable, cost-effective and secure mechanism for collaboration.

Evaluation Criteria Table 1. Evaluation Criteria Evaluation Criteria

Comment

Weighting

Sales Strategy

The strategy for selling products that uses the appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base.

Standard

Offering (Product) Strategy

The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature set as they map to current and future requirements.

Standard

Publication Date: 22 June 2011/ID Number: G00213356 © 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Evaluation Criteria

Comment

Weighting

Geographic Strategy

The vendor's strategy for direct resources, skills and offerings to meet the specific needs of locations outside the "home" or native geography, either directly or through partners, channels and subsidiaries, as appropriate for that geography and market.

Low

Innovation

Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes.

High

Market Responsiveness and Track Record

The ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customers' needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness.

Standard

Marketing Execution

The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message to influence the market, promote the brand and business, increase awareness of products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional, thought leadership, word-of-mouth and sales activities.

Standard

Overall Viability (Business Unit, Financial, Strategy, Organization)

Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood of the individual business unit continuing to invest in and offer the product, and of advancing the state of the art within the organization's portfolio of products.

High

Source: Gartner (June 2011)

Publication Date: 22 June 2011/ID Number: G00213356 © 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Figure 1. MarketScope for Email Systems

Source: Gartner (June 2011)

Vendor Product/Service Analysis Google Google has been innovating at a blistering pace with Gmail, making over two dozen substantial changes to enterprise Gmail over the past 12 months. This pace of innovation must be compared with Microsoft, which is still slavishly devoted to a three-year release cycle for Exchange, and has not yet moved Exchange 2010 to an enterprise cloud. The rapid updating of the Gmail service, however, also suggests the substantial effort Google must make to ensure that Gmail is suitable for broad-based enterprise use. The Gmail developments over the past 12 months fall into three general areas: security, user functionality and manageability. In total, they show Google approaching the enterprise capabilities of Exchange on-premises, and, in some areas, outstripping the current capabilities of Microsoft's cloud implementation of Exchange. Google, however, is still in the process of understanding all the nuances involved in supporting enterprises. An analysis of organizations that publicly committed to Gmail over the past year indicates that the three most popular industries for Gmail are manufacturing, government and retail. The common theme across manufacturing and retail is the desire to extend email and personal productivity services to task workers that may not have had access to IT services previously, and who are likely to work on a shared device. Government participation is driven by cost-saving initiatives and a desire to upgrade antiquated email systems. Google scored a major coup by securing the U.S. Federal General Services Administration contract — 20,000 seats — beating Microsoft and other vendors. Other significant wins over the past year include Cinram (10,000 seats), Konica Minolta (6,000 seats), Brady (6,000 seats) and Netherlands-based grocery holding company Ahold, with 55,000 seats. Rating: Positive

IBM IBM continues to be the No. 2 player in the enterprise email space. It announced a true cloud service for Lotus Notes/Domino in the third quarter of 2010. While LotusLive Notes appeals to Publication Date: 22 June 2011/ID Number: G00213356 © 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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existing Domino shops, we have not witnessed broad interest in it from non-Domino organizations. We have not yet seen enough LotusLive Notes deployments in the Domino installed base to make an in-depth evaluation of the service possible. IBM is expected to release a point version of Notes/Domino (8.5.3) in the middle of 2011, followed by a major upgrade (referred to here as "Domino Next") in late 2012. IBM plans to add four new collaborative elements to Domino Next: activity streams; a tool for in-context access to data and applications from the Notes in-box; a tool for users to share content; and an extensible navigation bar that gives users quick access to services such as updating status. These new elements will also be deployed across other Lotus collaboration products to heighten consistency within the Lotus portfolio. Domino Next is expected to consume and generate OpenSocial gadgets directly out of XPages, which will enable it to interact with a heterogeneous mix of social data and applications. IBM has outlined an ambitious and appealing strategy for Notes and Domino. Its core challenge will be to make the message resonate for organizations that are oriented toward Microsoft collaboration. We continue to see widespread interest in the Domino base in migrating to alternative platforms. Rating: Positive

Microsoft Microsoft continues to have positive momentum in the email market. Over the past 12 months, the company delivered the first service pack for Exchange (August 2010), which provides the fitand-finish needed for the 2010 version, which was released in late 2009. We anticipate that Service Pack 2 (SP2), which will support segmented address lists (among other things), will come out in 4Q11, and the next major version of Exchange is anticipated in 4Q12. Migration to Exchange 2010 has been steady and we suspect that Exchange 2010 will peak at about 45% of the Microsoft installed base in 2013. The real story is Microsoft's cloud version of Exchange, which is still based on Exchange 2007. That cloud implementation has extensive management limitations and a mixed support record. Uptake of the multi-tenant implementation has been generally limited to organizations with fewer than 1,000 seats. The dedicated version of Exchange Online has proven more mature, and about 40 companies with an average user population of 25,000 seats use the service. Microsoft will be upgrading Exchange Online to the 2010 version later in 2H11 and this will be the most critical email transition the company has ever made. A mature implementation with robust support will solidify Microsoft's predominant position in the email market and ensure a long-term orderly transition of its on-premises base to the cloud model. A problematic implementation, however, will severely diminish confidence in Microsoft's overall cloud strategy and create substantial opportunities for Google's Gmail. Rating: Strong Positive

Critical Path/Mirapoint In 2010, Critical Path acquired Mirapoint, a long-standing participant in Gartner's email MarketScope. Critical Path has a long history of supplying messaging solutions to large service providers, and in 2006 went private after a meteoric dot-com ride that reached a $1 billion valuation. The acquisition of Mirapoint should be thought of more as a merger of the two entities, given that both companies are similar in terms of revenue and employees. The combined company is expected to have revenue in the range of $75 million in 2011 and has a total of 400 employees. There is little overlap in products and a great deal of complementary technology between the two companies. Critical Path is strong in Europe and Asia (excluding Japan), while Mirapoint has focused on the U.S. and Japanese markets. Critical Path has typically targeted service providers that need more than 500,000 seats, and Mirapoint has targeted service providers in the 50,000 to 250,000 seat range, plus the enterprise and education markets. Critical Path has invested heavily in mobile, social and directory technology, while Mirapoint has focused

Publication Date: 22 June 2011/ID Number: G00213356 © 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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on email archiving and hygiene. Mirapoint has also concentrated on the appliance model, while Critical Path has pursued a traditional software model. The challenge for the combined company will be to move to a single research and development stream, and cross-pollinate the product lines. We have seen some signs of cross-pollination already, with some of Critical Path's traffic management and DomainKeys Identified Mail (DKIM) services improving the functionality and scalability of the Mirapoint RazorGate appliance. Additionally, the Mirapoint-heritage part of the company extended the breath of its enterprise offerings by providing directory, identity management and user provisioning services, and gained access to standards-based mobility and synchronization elements. Rating: Promising

Novell/Attachmate For a decade, Novell GroupWise has been a mainstream corporate email system, competing with systems from Microsoft, IBM and others. After years of declining market share, Novell was acquired late last year by The Attachmate Group, a $1.2 billion enterprise software holding company with a product portfolio that ranges across IT operations management, open source, end-user computing and collaboration, host connectivity and legacy modernization, security, identity and compliance management, virtualization and cloud computing. The Attachmate Group acquisition puts GroupWise on sounder financial footing compared to when it was part of an independent Novell. The GroupWise base is being eroded by Microsoft Exchange and, to a lesser extent, Gmail. GroupWise users are generally comfortable with the email system — Novell has done a good job with new releases, despite having a limited number of development personnel — but customers are primarily concerned about GroupWise's market staying power and diminishing third-party support. Given GroupWise's limited development resources, we expect the functionality gap with Exchange and Gmail to grow over the next few years. In May 2011, Novell — via an unspecified partner — introduced a hosted version of GroupWise with archive services from Sonian and spam and virus protection from Kaspersky Lab. The service, called HostedEM, is housed in a Verizon data center. In 4Q11 we expect Novell to release an update of GroupWise with improvements to the foldering, browser access and calendaring components, as well as integration with its Novell Vibe social services platform. Rating: Promising

Open-Xchange Open-Xchange is a German-headquartered company increasingly focused on the service provider and software OEM markets, while de-emphasing direct enterprise sales. Open-Xchange enables service providers to continue to run existing back-end email infrastructure while supporting the Open-Xchange Web client and other services such as social and Outlook integration and mobile access. Service providers can then increase customer satisfaction and add-on billing opportunities with the Open-Xchange software suite. The company has about 70 employees and is expected to generate about $8 million in revenue in 2011. About 20% of customers use a version of Open-Xchange that runs on the Parallels platform, which provides billing, tenant management, upgrade and support services. The company has 24 million seats under contract, with about 35% of mailboxes being accessed at least once per month. Its single largest customer is German Web hosting giant 1&1, which has about 6 million seats. Wins over the past 12 months include NetCologne, a telecommunication and Internet service provider in Germany with 250,000 customers, a 50,000 seat deployment in the city of Munich, and a 33,000 seat deployment at the University of Salamanca. Moving forward, Open-Xchange will focus on adding richer application support to its Web mail client, which it hopes to transition to a fully fledged Web desktop.

Publication Date: 22 June 2011/ID Number: G00213356 © 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Rating: Promising

VMware/Zimbra VMware's Zimbra email system has evolved over the last few years — it started life as a highprofile venture capital-funded firm, was acquired by Yahoo, and was then sold to VMware. The target market for Zimbra has expanded — it started life as a service provider email system, then added small businesses and educational institutions as customers. VMware has refocused the target market for Zimbra, with a concentration on small and midsize businesses (SMBs; 100 to 5,000 users). Consequently, VMware has packaged the Zimbra email system with vSphere in the form of a software appliance. The current appliance scales to 1,000 users, but will support up to 100,000 users in 2Q11. The core sales proposition will be — compared to Exchange in particular — that Zimbra has a lower cost of ownership, is more easily deployed and upgraded, and can be built as a private cloud. Zimbra is part of the VMware End User Computing business unit, where it is joined by a virtual desktop product and the newly acquired SlideRocket cloud-based slideshow product, as well as the Socialcast social suite. We anticipate that VMware will aggressively build out a broader collaboration stack via acquisition and development over the next 18 months, partnering with Cisco or Mitel for voice services, for example. Since joining VMware, Zimbra has doubled its employee count to 200. As part of the renewed focus on businesses, VMware has secured Purdue, Autobase, Rent-A-Center, Rotech, Skype and Empresa Brasilia de Comunicacao as customers over the past six months, and reports that it has 66 million paid mailboxes, sold mostly through hosters to small businesses. Rating: Positive

Xandros/Scalix With Scalix, Xandros is the steward of one of the venerable products in email history — HP OpenMail — which was a successful email system in the 1990s. After withdrawing it from the market, HP licensed the product to Samsung and a startup called Scalix. In 2007 Samsung discontinued the product, and Xandros acquired Scalix. The Scalix team at Xandros is about 25 people but draws resources from the pool of 100 Xandros employees as needed. Xandros has been aiming Scalix at the enterprise market but aggressive competition has constrained growth there, and now the company is focused on competing more aggressively for business from service providers and hosters. The primary deliverable for that push is a multi-server multi-tenant implementation, which comes with the forthcoming 11.5 version. That version, originally scheduled for 2H09 and then 2010, is currently in customer trials and is expected to ship in 3Q11. The anticipated Parallels implementation designed for hosters has slipped from 2010 to 2011. The company is working on a VMware vApp implementation, which will package Scalix with one or more VMware instances, which should also appeal to hosters. That combination will come with Scalix Version 12, which will also add deeper integration with social services beyond the Facebook support in version 11.5. Version 12 is expected in 2012. Xandros reports paid seats at about 2 million, from approximately 2,500 customers. The community edition of Scalix continues to be regularly downloaded but user counts are not tracked. A partnership with Synnex, a North American Red Hat distributor, which was designed to drive sales into the SMB market in 2010, was not as successful as anticipated. Over the past 12 months Scalix sales to organizations with more than 1,000 employees were rare. Rating: Caution

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Publication Date: 22 June 2011/ID Number: G00213356 © 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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"Combining On-Premises and Cloud E-Mail: Perfect Together?" "E-Mail Is a Commodity and Other Fairy Tales" "Office 365: The Exchange Implications" "Roundup of E-Mail Research Through 3Q10"

Vendors Added or Dropped We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope may change over time. A vendor appearing in a Magic Quadrant or MarketScope one year and not the next does not necessarily indicate that we have changed our opinion of that vendor. This may be a reflection of a change in the market and, therefore, changed evaluation criteria, or a change of focus by a vendor.

Gartner MarketScope Defined Gartner's MarketScope provides specific guidance for users who are deploying, or have deployed, products or services. A Gartner MarketScope rating does not imply that the vendor meets all, few or none of the evaluation criteria. The Gartner MarketScope evaluation is based on a weighted evaluation of a vendor's products in comparison with the evaluation criteria. Consider Gartner's criteria as they apply to your specific requirements. Contact Gartner to discuss how this evaluation may affect your specific needs. Various ratings are defined below: MarketScope Rating Framework Strong Positive Is viewed as a provider of strategic products, services or solutions: Customers: Continue with planned investments. Potential customers: Consider this vendor a strong choice for strategic investments. Positive Demonstrates strength in specific areas, but execution in one or more areas may still be developing or inconsistent with other areas of performance: Customers: Continue planned investments. Potential customers: Consider this vendor a viable choice for strategic or tactical investments, while planning for known limitations. Promising Shows potential in specific areas; however, execution is inconsistent: Customers: Consider the short- and long-term impact of possible changes in status. Potential customers: Plan for and be aware of issues and opportunities related to the evolution and maturity of this vendor.

Publication Date: 22 June 2011/ID Number: G00213356 © 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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Caution Faces challenges in one or more areas: Customers: Understand challenges in relevant areas, and develop contingency plans based on risk tolerance and possible business impact. Potential customers: Account for the vendor's challenges as part of due diligence. Strong Negative Has difficulty responding to problems in multiple areas: Customers: Execute risk mitigation plans and contingency options. Potential customers: Consider this vendor only for tactical investment with short-term, rapid payback.

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Publication Date: 22 June 2011/ID Number: G00213356 © 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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