Retro E-Mail Takes On Giants
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Tiny Scalix guns for Microsoft, Oracle, and Lotus, using a decommissioned battleship from HP.
By Rafe Needleman
business2.com
August 28, 2003
Dear Readers: This is my last column from Business 2.0. I am taking the month of September off for my honeymoon. I'll be back in October, and my column will be coming from a new publisher. If you're an e-mail subscriber to What's Next, you'll automatically get the new column when it starts. If you're not, but you'd like to get my column via e-mail, please drop me a line at rafen@rafeneedleman.com. Thanks!
Considering Microsoft's (MSFT) reputation for building systems that are unstable and unreliable, the company has done an amazing job of winning corporations over to Exchange. This e-mail and calendar server's business-friendly features have won it as much as 50 percent of the corporate market. But Exchange faces a host of serious threats from software companies both large and small.
FAST FACTS:
Scalix
www.scalix.com
CEO: Julie Farris, former entrepreneur-in-residence, Mayfield Venture Capital
HQ: San Mateo, CA
FOUNDED: June 2002
EMPLOYEES: 20
FUNDING: $13 million in one venture round
PROFITABLE: No
MARKET: Messaging and calendar services
On the large side, there's Oracle (ORCL), with its Collaboration Suite, which is being pitched as a drop-in replacement for Exchange. It's based, of course, on Oracle's market-leading SQL database, and the company says it's simpler to manage, partly because one Collaboration Suite server can replace dozens of Exchange servers. Oracle claims to have 500 customers for Suite, which replaces only the server-side Exchange product, not Outlook, the e-mail client that almost all of us already use. Oracle works with Outlook as a client, as well as with POP clients like Eudora and Netscape, and directly over the Web as well.
The Oracle vs. Microsoft battle for corporate IT dollars is a well-told story of one juggernaut (Oracle) gunning for an even bigger one. But there's an Outlook server platform from a small company, Scalix, that is poised to cause significant disruption to these giants, as well as to Lotus Notes and Novell Groupwise.
Now, no 20-person startup can come out of nowhere and immediately win the hearts and wallets of CIOs and IT directors. Scalix CEO Julie Farris realizes that you have to "pole-vault" into this market, and she has a clever way to do this.
It's this: Scalix's product isn't really new. It's based on OpenMail, Hewlett-Packard's (HPQ) enterprise-capable e-mail system that at one point ran 10 million to 15 million corporate mailboxes. HP stopped selling OpenMail at the end of 2001, claiming that keeping it up-to-date with emerging standards would reduce its efficiency. (HP's decision probably had more to do with corporate queasiness at the thought of taking on Microsoft in what was certain to be a losing battle.) Scalix acquired rights to the 1.5-million-line codebase and hired some of the OpenMail programmers. Scalix is pitching its updated OpenMail as the improved and modernized version of the mature and stable e-mail server that HP wouldn't upgrade. This, Farris says, is what's getting her salespeople meetings with CIOs. Scalix also runs on Linux, as do its direct competitors (including Oracle's product), which is another positive for enterprises.
Scalix isn't the first company to try to revive the OpenMail platform. Samsung, one of OpenMail's largest users, also acquired rights to the code and tried to make a business of it under the name Contact, but the product hasn't gotten much traction in the United States.
I'm not a CIO myself, and I can't say which e-mail platform is technically superior. But I like the Scalix approach, and I like the company's timing. Updating OpenMail is like releasing the modern VW Beetle to a customer base that's nostalgic for an old friend's maturity and reliability but wants it updated with modern clothes and sensibilities. Furthermore, IT staffs need increasingly simple and robust e-mail platforms so they can devote their time to combating viruses, worms, and spam, and managing legal compliance.
These factors represent opportunities for a new approach, and Scalix has the advantage of being not just new, but known. And unlike HP, this small company doesn't need massive market share today for its version of the product to be a success. It acquired the OpenMail codebase for much less than HP spent to build it, and it will be able to make a nice profit from a smaller customer base than HP ever required.
-Rafe Needleman
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