Email Consolidation Neither Simple nor Straightforward

In the last week I had an extensive conversation with an investment individual about what the future holds for email archiving and management software. On one hand, he astutely and accurately observed that the market is already saturated with products and that consolidation should occur. But when one looks beyond the general classifications of “email archiving” or “email management”, one quickly detects that many of these products are designed to solve specific problems in a specific market segment. As a result, email consolidation is neither as simple nor as straightforward as one might imagine and that there is still plenty of room for growth and innovation in this space.

First off, let’s examine why consolidation is not as easy as it first sounds. Granted, on one hand, many products do email archiving. The last time I did a formal count, there were at least 20 products on the market and realistically the total count is probably closer to 50 or more so it would seem that the market is ripe for consolidation. However, when one looks beneath the surface, consolidating products is not a straightforward exercise.

As an example, I recently did a briefing with Sherpa Software on its Mail Attender product which does email archiving, management and eDiscovery for both Lotus Notes and Microsoft Exchange. The fact that Sherpa supports both Lotus Notes and Microsoft Exchange makes it somewhat unique in the email archiving and management space. Most email archiving/management products either support either one or the other but not both.

Not only does this make consolidations more difficult since archiving and managing email messages on these two platforms requires very different programmatic interfaces (Sherpa has separate development teams for these two platforms), different archiving platforms manage their archives in different ways.  So if two vendors were to merge, they have to decide which products will survive and how they will manage the archives of the other product going forward. If they decide both products should survive, then the value proposition of consolidation becomes questionable since if they sunset one product, they have to figure out a way to manage the archives of the other product.

So is there room for growth for players like Sherpa Software? Their recent press release suggests that the answer is yes. Since June 2008 it has added 300 new customers  but the question is, “Why is there room for growth in a market that appears so saturated?”

The most obvious response is that Sherpa Software is positioned in a space where organizations with 50 – 5000 email mailboxes are now just starting to look at email archiving and management software. While most large organizations (5,000+ email mailboxes) probably already have software of this type in some form, these smaller organizations have largely escaped notice from regulatory agencies such as the SEC.

However the 2006 changes to the Federal Rules of Civil Procedure (FRCP) now make these size firms as susceptible to litigation and eDiscoveries as their larger counterparts. So no longer can they so easily avoid the need to archive and manage their email repositories as they could in the past so it is essentially “green pastures” in terms of growth.

How well Sherpa Software competes in this space is arguable. The fact that it supports Lotus Notes does give it an edge in those environments that are committed to Lotus Notes. But whether or not this hurts or helps Sherpa Software depends on which reports you believe. Both IBM and Microsoft routinely brag about taking market share away from the other though my personal experience tends to tell me that Microsoft is winning the battle on a larger scale. Also, I would expect to find Exchange in more of the shops in which Sherpa plays so I would expect more demand for its Exchange product than its Lotus Notes product.

The problem this presents for Sherpa longer term is they need to support two different development teams which could drive up its internal support costs longer term. Factors working in Sherpa’s favor are its 5 year-old HP relationship and its plans to enter the software as a service (SaaS) as an OEM.
Email archiving and management software vendors that are targeting organizations with mailboxes of 5000 or less are really just getting going and there is a lot of room left to grow without much fear of consolidation either near or long term. Organizations looking at Sherpa Software will find a lot of positives in the fact that it supports the two major email platforms, is growing, has a relationship with a nationally recognized vendor and is run by a management team that built the software. Where organizations need to exercise caution is that Sherpa’s software does not work in real-time with Exchange so it may not provide the monitoring and enforcement policies that some organizations need.

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