August 27, 2008

Cisco buys PostPath, targets Microsoft Exchange

Author: Steven J. Vaughan-Nichols

No one saw this coming. Cisco, the networking giant, announced today it was buying PostPath, maker of the Linux-based Exchange server replacement PostPath Server.

PostPath is best known as a drop-in replacement for Microsoft Exchange. Unlike other would-be Exchange competitors Scalix and Lotus Domino/Notes, which use a Outlook-compatible Mail Application Programming Interface (MAPI) on the client PC, PostPath actually reverse-engineered Microsoft's MAPI and Active Directory (AD) protocols. This means that, from the network and Windows PC's viewpoint, PostPath actually appears to be an Exchange server.

While PostPath is the only Exchange challenger that has used reverse-engineering to challenge Microsoft, its approach may be adopted by other open source companies. When the European Commission forced Microsoft to open up the Common Internet File System (CIFS) and AD protocols, it also forced the company to open up the MAPI protocols.

An open source project called OpenChange is now working with Samba using this information to build open source implementations of Microsoft Exchange Server and Exchange protocols. No commercial open source business is currently following up on OpenChange's efforts, though, according to Sarah Radicati, CEO of The Radicati Group.

With PostPath's software, Cisco plans on extending the email and calendar functionality of its software-as-a-service (SaaS)-based WebEx collaborative platform, which already incorporates instant messaging, voice, video, data, document management, and Web 2.0 applications. Specifically, "The acquisition of PostPath complements our strategy to develop an integrated collaboration platform designed for how we work today and into the future, providing real productivity gains and a more satisfying user experience," says Doug Dennerline, Cisco's senior vice president of the Collaboration Software Group, in a statement.

If that sounds like a challenge to Microsoft and Exchange -- which, according to a recent Ferris Research survey has a business email market share of 65% -- it is. According to a highly placed source at Cisco, "We have been unhappy with Microsoft for some time before the release of Exchange 2007, which included VoIP (Voice over Internet Protocol) in its Unified Messaging suite. It was time to offer our customers an alternative." Cisco had long been a VoIP leader using the Session Initiation Protocol (SIP), which Exchange 2007 also now supports.

Cisco CEO John Chambers said, during Cisco's last quarterly report, "If you think about what we're going to do, we usually acquire ... when we move into new markets that we do not have the expertise for the product segments in." At the same time, the PostPath deal does fit in well with Cisco's existing WebEx Connect collaboration platform. Cisco was quick to make this very point in its announcement of the deal.

Cisco watchers had been hoping that Chambers would start buying again, since it is widely believed that he would only OK any new Cisco acquisitions if he believed the market had finally bottomed out.

Ferris Research analyst Richi Jennings thinks Cisco made a great deal. Jennings says, "Once again, Cisco makes a sound investment in an email technology vendor, just like it did with IronPort," an email security appliance provider.

As for PostPath, Jennings says, "These are the clever guys who reverse-engineered the Exchange client protocol, MAPI/RPC, and the related on-the-wire details needed to make a vanilla install of Outlook talk to a non-Exchange mail server with full fidelity. Impressive stuff. Of all the other Exchange alternatives, PostPath has the most interesting architecture. And I say that as one who has years emotionally invested in the OpenMail technology" -- which served as the foundation for Scalix.

Looking at the deal itself, Jennings opines, "I think Cisco fell out of love with Microsoft a while back. Something to do with VoIP support in Exchange and how Cisco thought it was Microsoft's partner but it turned out that Microsoft was competing with them. Nothing familiar there at all...."

As for what Cisco plans, Jennings says, "Sounds like Cisco wants to offer SaaS collaboration, based on PostPath and WebEx. Whoever said the email world has become dull and uninteresting?"

Cisco will pay approximately $215 million in exchange for PostPath's shares. The acquisition is expected to be completed in Cisco's first quarter of fiscal year 2009. Upon completion of the acquisition, PostPath employees will become part of the Cisco Collaboration Software Group.

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