Deal Radar 2009: Open-Xchange

Open Xchange, an open source software company, aims to provide users with an affordable ‘Internet-age’ alternative to commercial email and collaboration platforms like Microsoft Exchange and SharePoint. The company offers features such as shared calendars, document sharing, shared address books and email for iPhones and BlackBerry devices. 

Open-Xchange AG is a privately-held company with headquarters in Nuremberg, Germany and offices in Olpe, Germany and Tarrytown, New York. 
   
The company has raised $17.8 million so far: an $8.8 million series A led by BayTech Venture Capital, a Munich-based investor, in 2006; and a $9 million Series B led by Capital Entrepreneurial Partners AG, a Munster-based, high-growth IT equity firm and Munich-based BayBG. Previous investors BayTech Venture Capital also participated in this round.

When Open-Xchange was founded, there were no similar companies offering a SaaS model and just a few smaller open source projects that were not much of a challenge to the market leaders, Microsoft Exchange and Lotus Domino. Today, several players such as Zimbra and Postpath have entered the market and Zimbra has since been acquired by Yahoo!.

With its SaaS delivery model, Open-Xchange has carved out a space for itself, adding 6 million users in 2008. Their server software has been installed by more than 3,500 companies and organizations worldwide. Open-Xchange grew to nearly 10 million paid business mailboxes in 2008 (an increase of 4 times over 2007) as a result of partnerships with several hosting companies. Through its partnership with 1&1 Germany, it boasts 4.5 million webmail accounts and another couple of million for the rest of the world. Through Network Solutions it has over 1 million webmail accounts. Other hosting companies it has tied up with are OVH and Hostpoint.

According to a report by the Radicati Group, the hosted e-mail market grew from 1 billion in 2006 to 1.6 billion in 2008, with a major portion of this growth from small and medium businesses. At present there are about 1.6 billion hosted email accounts compared with approximately 400 million in-house, on-premise e-mail accounts, and that number is expected to grow by nearly 40% in the next four years.

Open-Xchange’s SaaS offerings are targeted at small and mid size business with two to 200 users. According to the company, SaaS offerings are up to 90% less expensive than on-premise solutions in total cost ownership. Open-Xchange addresses this market worldwide through hosting providers, ISPs and telecommunication companies. Open-Xchange is also suited for on-premise installation at universities, government authorities and large enterprises with more than 1,000 users, and they address this market through a partner network of qualified system integrators.

The company was founded by Rafael Laguna de la Vera, CEO. Laguna began his career at Dicomputer and later joined software company Micado, which was sold to PMSC in 1995. He also worked as an angel investor and consultant at several VC firms and was crucial to the sale of SUSE Linux to Novell. In 2001, Laguna initiated the technology partnership between Open-Xchange’s development team and SUSE Linux, and as a result the SUSE Linux Open-Xchange Server became the best-selling Linux-based groupware solution. Frank Hoberg, co-founder and EVP, also founded Netline Internet Service and was CEO of both Open-Xchange and Netline from 1998 to 2007. Martin Kauss, co-founder and chief architect, co-founded Netline with Hoberg. He is responsible for all engineering processes within the company. CTO Juergen Geck joined Open-Xchange in 2007 and is responsible for the development and communication of the company’s technology strategies.

For the future, Open-Xchange hopes to sign up as many service providers as possible through their recent Webmail 4 Free initiative. They expect their ‘social media meets business’ strategy to help integrate users’ private and business lives, making this kind of software indispensable to users. Laguna, like many other CEOs today, says “Never think about an exit. Think about how you build your business. The rest will follow.” Whether you believe it or not, that’s the fashionable thing to say, anyway!

Recommended Reading:

Deal Radar 2009: Central Desktop
Deal Radar 2009: Plain Black
Deal Radar 2009: IntraLinks

This segment is a part in the series : Deal Radar 2009