On 9 November 2009, Cisco entered the cloud e-mail market using technology it acquired last year from Postpath. Cisco is offering mailboxes with Outlook (MAPI) and Active Sync support for $5 per user per month, and browser-only mail services (derived from the Zimbra open-source Ajax interface) for $3.50 per user per month. The basic mailbox size is 5GB, with options up to 35GB. BlackBerry Enterprise Server services will be available for $1 per user per month. Cisco's Ironport service will provide spam and virus filtering services.

Cisco's long-expected entry into the enterprise e-mail field underscores several fundamental market dynamics. The company is anxious to participate in the fast-growing market for cloud-based application services, which it hopes will buttress its long-term growth. Cisco also needs to protect its voice over IP (VoIP) business, which may be threatened by Microsoft's heavy investment in its own voice services. Since voice services will increasingly be bundled into a single-vendor unified communication and collaboration (UCC) stack, Cisco has to deliver a comprehensive suite of services — with e-mail at the core — to protect its VoIP and WebEx Web conferencing franchises.

Cisco enters the field at a time of great flux, characterized by rapid price erosion. Google's commercial Gmail offer, which it discounts to less than $3 per user per month, is attracting considerable attention. IBM recently announced an offer of $3 per user per month. Last week, Microsoft cut the list price of its core cloud collaboration suite to $10 per user per month, and its cloud Exchange service to $5 per user per month. But the shift to cloud e-mail services is recent: No more than 5% of enterprise users currently have a cloud-provisioned mailbox.

Cisco WebEx Mail's marketing is likely to focus on its close compatibility with Microsoft Exchange. A server-side MAPI layer will provide rich Outlook support, and Cisco will stress the ease of migration from and coexistence with Exchange. While the cloud e-mail market offers significant opportunities, Cisco will be challenged to clearly articulate the benefits of WebEx Mail and to overcome enterprise concerns over its lack of e-mail market experience. Over the next 18 months, to remain relevant in this space, Cisco must build out a price-competitive suite of collaboration services that rivals Microsoft's Business Productivity Online Suite combination of e-mail, instant messaging, Web conferencing and shared workspace.

Organizations should:

• Cautiously approach cloud e-mail services, especially those organizations with complex compliance and application integration needs.
• Actively engage multiple vendors to create competitive pricing dynamics in the procurement process.
• Consider segmenting some users on to lower-cost e-mail platforms.

• "Exchange Market Vulnerability Starts With Outlook"— In the e-mail software-as-a-service space, the Microsoft Exchange franchise is vulnerable to attack by Google and Cisco delivering support for the Outlook client. By Matt Cain
• "Cisco Challenges Microsoft in E-Mail With PostPath Acquisition"— Buying e-mail vendor PostPath will add Cisco to the competitive UCC market, along with Microsoft, IBM and Google. By Matt Cain

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This research is part of a set of related research pieces. See Roundup of Business Intelligence and Information Management Research, 4Q09 for an overview.