Was Cisco Right to Bail on Mail?Was Cisco Right to Bail on Mail?

Potentially, Cisco can do more damage to its rivals by accelerating the move from e-mail to social media.

Yesterday Eric Krapf posted a blog about Cisco ending its investment in cloud based mail. Cisco entered this market about two years ago though the acquisition of Post Path, and WebEx Mail was thought of by many (myself included) as Cisco's counter punch to Microsoft moving into the communications market with the release of OCS (Lync).

Cisco is the king of finding the right time to move into a market when it's going through a transition and capturing share rapidly. The theory with the Post Path acquisition was that as customers moved its mail to the cloud, Cisco could quickly grab share away from the incumbents.

So what happened here? Is Cisco wrong? Is there no transition coming?

I for one am disappointed that Cisco pulled the plug on its e-mail service as I'm a big believer in cloud based e-mail. Last year at Yankee Group we dumped the clunky, expensive Lotus Notes e-mail package in favor of corporate Gmail and it's made a world of difference. Accessing Notes required a bunch of specific configurations on my laptop and then routing all of our mail through a Blackberry Enterprise Server (BES) for mobile access.

Gmail has simplified my life greatly. I carry a Windows laptop, iPad and Android phone, and accessing mail from any of these devices is easy and has a great experience. Plus, I no longer get the message telling me my mail box is full since we have 25 Gigs of storage per person. No unique configuration on my laptop, no BES server, just a great experience, so I do think a market transition is coming.

So why did Cisco bail? I think there are many reasons why I think it made sense for Cisco to move out of this market, all of which reasons are interrelated.

The first is based on some of the comments Debra Chrapaty made in her blog, that Eric reiterated in his blog--e-mail is commoditized and not a strategic element of a company's collaboration strategy. While I think the word "commodity" is a bit strong, I do think though that e-mail usage has peaked and becomes less important over time (see my blog from last year on this topic). E-mail usage was driven by people of my generation that shifted communications away from the phone.

Similarly, the next wave of workers will move communications away from e-mail to something else, most likely social networking tools. Many college students and younger workers do not have e-mail, do not like to use e-mail and will do everything they can in the work force to not use e-mail. You can call me crazy but the generational influence is far too strong a force to ignore and will change the way we work. There's currently no de facto leader in corporate social media and leadership in it is still to be determined.

Companies like Microsoft and IBM may have the inside track because of buying centers, etc but the opportunity is there for anyone that wants to step up and grab. Cisco is better off ensuring that it nails the social media market rather than do it and e-mail half right. Part of the shutting down of WebEx Mail is shifting many of the e-mail resources (about half) from that team to Quad, Cisco’s social media platform.

Another reason is Cisco's need to focus. Cisco is a $40+ Billion company that has told Wall Street that it can grow 12%-17% over five years. How does it do this?

Cisco's strategy had been to move into over 30 adjacent markets simultaneously. This would allow Cisco to catch multiple transitions and hit those growth numbers. However, this hasn't worked to plan and Cisco's stock price has been flat over the past several years, making many investors lose confidence in Cisco's ability to execute on the long term growth number.

I've talked to many investors and even some internal employees that feel the number of adjacent markets that Cisco is playing in is too broad and it's caused Cisco to miss some transitions that should have been a slam dunk for a networking company with the vision that Cisco has had. The Application Delivery Controller market has been one where F5 has taken off like a rocket and so have Session Border Controllers where Acme Packet has had a similar rocket effect.

Over the next year, I would expect Cisco to take a pretty hard look at all of the markets it is in and we will see it pull out of a few other markets, putting more focus on other areas. Long term it's more important for Cisco to be big winners in a few markets rather than being OK in many markets. Cisco needs to focus, and the pull back on e-mail is a small indicator that it's doing that.

Lastly, e-mail is a tough market with some big incumbents. IBM and Microsoft have the ear of the buyer today and have put together their own cloud strategies. Couple this with the fact that Google is now into e-mail and perhaps the opportunity to grab this market in transition just wouldn't be there because of the strong competitive landscape.

In summary, while I would have loved to have seen Cisco go after Microsoft and see if it could take a chunk out of Exchange, I understand the reasons why. Potentially, Cisco can do more damage to its rivals by accelerating the move from e-mail to social media. So as long as Cisco puts the right focus on Quad, moving out of e-mail should be a better long term for the company.