Cisco Kills Hosted E-Mail Service 13 Months After Launch

Cisco killed its hosted e-mail service just 13 months after launching it because it couldn't get enough customers to sign on despite the wide popularity of cloud application services.

Cisco Systems pulled the plug on Cisco Mail, the hosted e-mail service it launched a mere 13 months ago.

While Cisco Mail was "well received," Cisco found that customers were not interested in hosted e-mail as much as they cared about "social software and video," Cisco said in a Feb. 22 blog post announcing the decision. Cisco declined to provide further details.

"We've since learned that customers have come to view e-mail as a mature and commoditized tool versus a long-term differentiated element of their collaboration strategy," wrote Debra Chrapaty on the blog.

Cisco originally launched Cisco Mail in November 2009 because customers said they were interested in "divesting responsibility" for managing e-mail in the same way they switched to using WebEx for Web conferencing, according to Chrapaty. The service was rolled out via controlled release.

As more customers got used to the concept of cloud computing and saw the benefits, there was demand for additional cloud services, according to Cisco.

Cisco's move demonstrated the challenge of penetrating a mature market and the difficulty in delivery a complex and demanding cloud-based application service, Matthew Cain, vice-president and lead E-mail analyst at Gartner, wrote in a research note. Cisco invested $250 million in the platform, according to Cain.

Cisco was completing against several established players in collaboration, including Google Apps and Microsoft's Exchange Online, with far more storage for a lower price. Cisco offered a standard package of $5 per month per user which including Outlook support, Web 2.0 webmail client, e-mail, calendar, with only 5GB storage. In contrast, Google Apps for businesses offered more functionality with 25 GB storage for $50 per user per year. Microsoft offered cloud-based Exchange with 25GB of storage for only $5 per user per month.

Back when Cisco launched Cisco Mail, Cain noted in a research note that there was "rapid price erosion" in the field, as all the vendors were slashing prices. Cisco needed to build out a "price-competitive suite of collaboration services" that included e-mail, instant messaging, Web conferencing and shared workspace, Cain wrote at the time. Launching Cisco Mail was critical to protecting Cisco's voice-over-IP and WebEx business, he said.

Cisco remains "very committed" to collaboration technology, Chrapaty wrote. The collaboration technology market is valued at about $38 billion, according to Cisco.

However, without e-mail at its core, Cisco will struggle to win customers over to its collaboration services, Cain wrote. Enterprises would rather select a single supplier for their unified communications and collaboration services, he said. To succeed, Cisco needs to "demonstrate value" beyond what Microsoft already delivers, according to Cain.

"It takes away the ability for customers to use Cisco as a single stack collaboration vendor," said Cain.

Cain also noted that "the incumbent e-mail supplier," such as Microsoft, is generally in the best position to provide additional collaboration services since enterprises would just bundle in the new products on top of the same infrastructure.

Cisco will assist customers with their transition to other e-mail platforms, whether they find a new hosted provider or go back to an on-premise solution. Cisco will "continue to integrate" other platforms to protect legacy systems and customers will continue to receive support for the remainder of their contracts, Chrapaty said.

The Cisco Mail team will be reassigned to other collaboration products and services that are "more strategic," Chrapaty said.

Cisco's biggest challenge would be to convince customers its other cloud initiatives will be around for the long haul, such as the collaboration platform Cisco Quad, its Web-casting and video-sharing application Show and Share as well as its collaboration tool Cisco Pulse, Cain said.

"If Cisco is pulling the plug in such an extensive effort, what reassurances to potential customers have that the same fate does not await other products?" asked Cain.