Rackspace Gets Webmail.us

Webmail.us is eager to do more in the business services space, taking webmail to the next level.

by Alex Goldman ISP-Planet Managing Editor [October 2, 2007]

When we last talked to Patrick Matthews, CEO of Blacksburg, Va.-based Webmail.us, was enthusiastic about AJAX, which promised both new features and swifter response.

Now he has taken it to the next level, announcing that San Antonio, Tex.-based Rackspace Managed Hosting has acquired his company. Matthews will remain and his company will become Rackspace's business e-mail division. "We're not losing one person," says Matthews. "We're going to create jobs here in Virginia and in San Antonio related to the e-mail part of the business."

He says Webmail.us will retain its brand, because Rackspace understands that Webmail.us has been successful in a crowded space, with tough competitors ranging from GoDaddy to Google, by focusing specifically on business e-mail.

E-mail is very important. It's the killer app for business.

The next step
But e-mail is merely the keystone of the service that Webmail.us wants to offer. "I haven't told a lot of people this," says Matthews, but unlike our competitors, we're going to embrace Microsoft Exchange. We will offer hosted Exchange and hosted e-mail as we move up market."

The barrier to Exchange for many businesses, Matthews says, is that many people at a company only need e-mail, while the executives need calendaring and the other collaboration tools Exchange offers. "In our webmail interface, we have basic calendaring and collaboration, but there's very robust collaboration in Exchange," he explains.

In a 200 person business, you might find 40 executives who need Exchange while the other 160 employees only need basic e-mail. Matthews says that Exchange can cost $15 per user per month while basic e-mail could be $3 per user per month (before volume discounts). If Webmail.us can sell a business only the Exchange seats it needs, and provide the other employees basic e-mail, it can offer a price that will beat anyone trying to sell 200 Exchange seats to the same business.

The future
This is what we're seeing in the ISP space. Large, successful companies like Rackspace Managed Hosting aren't buying out the competition (as happens, say, in retail and hospitality). Instead, large ISPs believe they can beat the competition by offering a better product, and are making careful, selective acquisitions to improve their offering, whether it's Rackspace buying Webmail.us, Yahoo buying Zimbra, or Aplus.net acquiring design shop WebImage.

The acquisition doesn't mean that the acquirer relies exclusively on the purchaser. When Om Malik broke this story on Sunday night, a commenter on his site asked whether the deal with Rackspace would affect Webmail.us' use of Amazon S3. Matthews said it will not, and that it's good to have a separate backup system outside the Rackspace data centers.

Matthews expects the competition to get more intense, so he has to be doing everything right. ISPs, he says, know that they have to partner with someone. "The difference between us and Google and Yahoo is that we are 100 percent focused on business e-mail. ISPs should not see us as a competitor but as a partner," he says.

Staying alive in this marketplace means providing the best e-mail and hosted IT services you can. For some ISPs, that will mean partnering with Webmail.us and Rackspace.

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