Cisco kills off its hosted e-mail product

Company had invested about $250 million in the cloud offering

Cisco Systems has decided to kill Cisco Mail only 13 months after it introduced the cloud-based e-mail service, according to a Cisco blog post on Tuesday.

With the growing acceptance of cloud computing, Cisco saw a chance to offer e-mail services along with its successful WebEx Conferencing service, which combines desktop sharing through a Web browser with phone- and videoconferencing. But it seems customers weren't as interested in getting e-mail from the networking giant.

Cisco's failure, after investing $250 million in the initiative, demonstrates the challenge of penetrating a mature market -- and the difficulty of delivering a complex and demanding cloud-based application service, Gartner analyst Matthew Cain wrote in a research note.

Cisco said it folded the service because customers have come to "view their e-mail as a mature and commoditized tool," which has apparently made the field less interesting for Cisco.

Before committing to any cloud e-mail platform, companies ought to validate its success and momentum, Cain noted.

Cisco Mail competed with Google Apps, an online package of e-mail, scheduling and productivity tools. The companies are very much polar opposites. While Cisco aims to find new areas where it can charge a premium for its products and services, Google aims to make products and services a commodity, in order to boost advertising sales.

When the search giant launched Google Apps in 2007, it immediately set an extremely low price for the offering, Cain said in an e-mail.

On paper, it's evident that Cisco was fighting a losing battle. Google Apps offers a wider set of services with more storage for less money.

Cisco Mail's standard package, which included Outlook integration and 5GB of storage, cost $5 per user per month, while Google Apps for Business offered five times the e-mail storage for $50 per year.

Organizations are increasingly buying suites of collaboration tools, according to Cain.

Companies that want to move e-mail and other applications to the Web can choose other suites, including Microsoft's Exchange Online, which offers 25GB of storage for $5 per user per month. Today, Exchange Online is part of Microsoft's Business Productivity Online Standard Suite, which also includes SharePoint Online, Office Live Meeting and Office Communications Online. It will also be part of Microsoft's Office 365 online productivity package when it launches later this year.

Cisco said it will assist existing Cisco Mail customers with their transition to other e-mail alternatives. The company also said that it will offer customers support for the length of their contracts.

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