Welcome!

Open Source Cloud Authors: Liz McMillan, Pat Romanski, Elizabeth White, Yeshim Deniz, Zakia Bouachraoui

Related Topics: Agile Computing, Open Source Cloud, Release Management

Agile Computing: Article

Opinion: The Real Cost of Acquisitions - the Zimbra Story

Most acquisitions fail, but I believe this particular one was particularly poorly thought out

There are reports that Yahoo has put Zimbra on the block. Honestly, this came as no surprise at all to us at Zoho.

I remember scratching my head when the acquisition was made; I didn't see how an enterprise/business focused open source offering like Zimbra fit with Yahoo, as a technology, as a business or strategically. Zimbra is an open source installable product offering primarily intended to be installed within medium to large organizations. Yahoo has never made an installed product in its history and is mainly focused on consumers, with an occasional foray to sell those consumer-focused applications to small businesses.

Zimbra's service provider offerings made no strategic sense to Yahoo either, because Yahoo, being a service provider itself, has no interest in selling technology to other service providers like Comcast. Finally, we have been on both sides of the product vs. web-service divide, and I can assert with confidence that it is not easy to take a product and make it into a scalable web service; in fact, the main reason Zoho Mail got delayed was that it was originally written as an installable product, much like Zimbra, and we essentially rewrote it to be a web service.

Most acquisitions fail, but I believe this particular one was particularly poorly thought out. The real cost of the acquisition is not just the $350 million paid by Yahoo. In 2007, Zimbra was starting to position itself as a cloud applications suite, a competitor to Zoho, and better known than Zoho. It is fair to say that today Zimbra is not our main competitor. The acquisition clearly slowed them down. Of course, from the point of view of investors or management, the Zimbra acquisition made sense: they got theirs, so it is a “win” for them.

It is unlikely that anyone would pay $350 million for Zimbra today, so for Yahoo, it is a clear monetary loss. Zimbra customers lose too, because both the original acquisition and now the de-acquisition inevitably lead to product delays and confusion. Ultimately, the Zimbra acquisition proved to be a negative-sum game, or value destruction. The price paid wasn't compensated by the value created to Yahoo or the customers.

Why do we care to write about this? Actually, deals like Zimbra are why we never took venture capital and have said “no” to acquisitions. I know and respect a lot of venture capitalists, but I honestly believe the VC model is too “exit” focused. I would not say that VCs pressure companies to sell (that would be too simplistic), but the implicit understanding when you take venture capital is that you have to be working towards an exit. Well, for some of us, a company is not just a disposable commodity; it is an institution, a culture, and we prefer to build things slowly. In that sense, though we are direct competitors, I really admire the 37Signals crew, and we really respect their view on this.

[This Opinion piece appeared originally here and is republished under a Creative Commons license.]

More Stories By Sridhar Vembu

Sridhar Vembu is CEO of ZOHO Corp. (formerly AdventNet Inc.), the company behind the Zoho suite of online applications. Learn more about Zoho at www.zoho.com, follow us on Twitter at @zoho and contact Sridhar at [email protected]

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


IoT & Smart Cities Stories
Digital Transformation: Preparing Cloud & IoT Security for the Age of Artificial Intelligence. As automation and artificial intelligence (AI) power solution development and delivery, many businesses need to build backend cloud capabilities. Well-poised organizations, marketing smart devices with AI and BlockChain capabilities prepare to refine compliance and regulatory capabilities in 2018. Volumes of health, financial, technical and privacy data, along with tightening compliance requirements by...
DXWorldEXPO LLC announced today that ICOHOLDER named "Media Sponsor" of Miami Blockchain Event by FinTechEXPO. ICOHOLDER gives detailed information and help the community to invest in the trusty projects. Miami Blockchain Event by FinTechEXPO has opened its Call for Papers. The two-day event will present 20 top Blockchain experts. All speaking inquiries which covers the following information can be submitted by email to [email protected] Miami Blockchain Event by FinTechEXPOalso offers sp...
Digital Transformation is much more than a buzzword. The radical shift to digital mechanisms for almost every process is evident across all industries and verticals. This is often especially true in financial services, where the legacy environment is many times unable to keep up with the rapidly shifting demands of the consumer. The constant pressure to provide complete, omnichannel delivery of customer-facing solutions to meet both regulatory and customer demands is putting enormous pressure on...
SYS-CON Events announced today that IoT Global Network has been named “Media Sponsor” of SYS-CON's @ThingsExpo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. The IoT Global Network is a platform where you can connect with industry experts and network across the IoT community to build the successful IoT business of the future.
The best way to leverage your Cloud Expo presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering Cloud Expo and @ThingsExpo will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at Cloud Expo. Product announcements during our show provide your company with the most reach through our targeted audiences.
Machine learning has taken residence at our cities' cores and now we can finally have "smart cities." Cities are a collection of buildings made to provide the structure and safety necessary for people to function, create and survive. Buildings are a pool of ever-changing performance data from large automated systems such as heating and cooling to the people that live and work within them. Through machine learning, buildings can optimize performance, reduce costs, and improve occupant comfort by ...
@DevOpsSummit at Cloud Expo, taking place November 12-13 in New York City, NY, is co-located with 22nd international CloudEXPO | first international DXWorldEXPO and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time t...
CloudEXPO New York 2018, colocated with DXWorldEXPO New York 2018 will be held November 11-13, 2018, in New York City and will bring together Cloud Computing, FinTech and Blockchain, Digital Transformation, Big Data, Internet of Things, DevOps, AI, Machine Learning and WebRTC to one location.
DXWorldEXPO | CloudEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.
Disruption, Innovation, Artificial Intelligence and Machine Learning, Leadership and Management hear these words all day every day... lofty goals but how do we make it real? Add to that, that simply put, people don't like change. But what if we could implement and utilize these enterprise tools in a fast and "Non-Disruptive" way, enabling us to glean insights about our business, identify and reduce exposure, risk and liability, and secure business continuity?