Cisco Challenges Microsoft in E-Mail With PostPath Acquisition



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Buying e-mail vendor PostPath will put Cisco in competition with Microsoft for leadership of the burgeoning unified communications and collaboration market.

News Analysis


On 27 August 2008, Cisco Systems announced a definitive agreement to acquire PostPath, a small, privately held e-mail vendor, for $215 million. Cisco expects to close the deal in October 2008.


This deal demonstrates the growth of the unified communication and collaboration (UCC) market, where tools such as instant messaging (IM), voice, e-mail and conferencing merge into a suite with a high degree of interoperability. Microsoft has aggressively used its strong position in e-mail to move into adjacent markets. Most recently, it has invested heavily in the voice over Internet Protocol (VoIP) market, thereby threatening one of Cisco's core businesses.

Conversely, Cisco has attempted to use its position as VoIP market leader to move into other communication markets. In 2007, it acquired Web conferencing leader WebEx for $3.3 billion, and it has slowly built out its IM and presence capabilities. But no vendor can succeed in the UCC market without a strong e-mail presence. PostPath has a Linux-based e-mail system that it has marketed as a replacement for Exchange: It can work natively with Active Directory and supports the Outlook client. PostPath's small size made larger companies hesitant to buy the e-mail system, a problem solved by Cisco's ownership. The Cisco/PostPath partnership will threaten the Exchange franchise.

But Cisco faces substantial challenges in cracking the e-mail market. No new e-mail vendor has successfully penetrated the commercial space in a decade. Cisco plans to attack the e-mail market via a change in the provisioning model from on-premises deployment to software as a service (SaaS) — just as Google is doing. Cisco will offer PostPath e-mail services alongside WebEx, which has expanded beyond conferencing to include IM and voice services. Cisco is moving into SaaS to maintain its high growth rate (and to be valued as growth company by Wall Street), but success requires a retrained sales force, new customer relationships, deep knowledge of cloud technology and billions of dollars in investment.

If properly integrated, the acquisition of PostPath makes Cisco a more formidable competitor to Microsoft, both of which join Google and IBM in the struggle for a share of the future UCC market. We also expect telco gear suppliers such as Avaya to make e-mail acquisitions, and Yahoo will likely offer a commercial e-mail service by 2H09. By 2010, the UCC market will be radically different compared to just two years ago.


  • Consider investments in communication and collaboration technologies as a group rather than as separate technologies

  • Plan investments over a five year period, both from a vendor and a provisioning model perspective.

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