This week, VMware officially announced its acquisition of Zimbra, an open-source e-mail vendor from Yahoo!. The acquisition would give VMware an open-source enterprise collaboration platform, including e-mail. Many collaboration vendors, such as Cisco with its acquisition of PostPath, have filled out their portfolios with e-mail to offer a more end to end collaboration solution. IBM and Microsoft have long been the incumbents in this space, but players such as Google and Zimbra have provided enterprises, both big and small, with an alternative email platform.

Zimbra totes its open source alternative, and offers a solution that allows for enterprises to have either a desktop client, web based client, or hosted solution. Collaboration in general, which includes a number of different communications applications (instant messaging, e-mail, voice, etc) has been making its way into enterprises as they look for tools to help increase productivity, reduce travel expenses, bring together resources from different parts of the globe, and ultimately reduce time to market for whatever products and services are being released. The concept of collaboration and the tools that enable it are changing the way enterprises work and deliver their products and services today.

So where does this fit in VMware’s world?

It seems kind of odd at first glance that the leader in virtualization is allegedly looking to move into, of all things, e-mail. The collaboration market in general, is saturated, with vendors such as IBM, Microsoft and Cisco carrying end to end solutions. There are a flood of smaller, niche vendors as well, making for a very crowded, fragmented market. My hope is that VMware did not acquire Zimbra, with only 3.6% of market share in hosted email (source:2008, Frost & Sullivan), in the hopes of becoming a formidable player in the e-mail or overall collaboration market, because it will be a major disappointment.

However, as 2010 begins, the bigger picture starts to unravel as the rat race for IaaS vendors to move up the stack begins. VMware looks to become more of a platform, and has made strategic acquisitions, including SpringSource (who had acquired Hyperic earlier in 2009). I’ve made my argument over the past few days (since the rumor broke) about VMware’s intentions with respect to this acquisition. I understand the need to move up the stack, become more of a platform, gain SaaS knowledge, etc. In fact, I think any vendor should be doing this as part of their growth strategy. It provides enterprises with more of a comprehensive solution, which in turn, provides them with more value.

What I did question was the kind of company they acquired.

Why Zimbra, who is basically a hosted e-mail provider?

I understand they already had a relationship with them, but why not continue that relationship, and instead, look at another company? Enterprises are looking for the business value in applications. Although e-mail does provide this, there are more critical areas where VMware could have made this investment. Customer relationship management, business intelligence, vertical applications, etc all provide tremendous value to enterprises. If we’re looking to continue pushing the value proposition of Cloud, then it will be necessary to provide applications that directly impact an organization’s business processes, which then adds to a bottom line. When I think about the potential of Cloud, I’d like to see more dynamic applications that can truly provide transformational value for an organization.

There is much potential for vertical applications, in areas such as healthcare, financial services and retail. Vendors should look to these types of applications to enhance their portfolios, and better target their customers. Providing a more targeted solution gives customers the feeling that their vendor truly understands their business.

Just my 2 cents…but what are your thoughts? What kind of vertical applications do you think would gain traction?