Add to iTunesSatish Dharmaraj - CEO Zimbra (Acquired by Yahoo)
Introduction
On this special episode of Read/WriteTalk, we have both a great guest and guest interviewer. Richard MacManus the founder and editor of Read/WriteWeb as well as the co-producer of Read/WriteTalk interviews Satish Dharmaraj the CEO of Zimbra. Zimbra was recently acquired by Yahoo! and Satish has some insights to share both about the company and his philosophy as an entrepreneur.
Links
Transcript
| 0:30 | Richard: Satish, Congratulations, first of all, on the Yahoo acquisition. It has been exactly two years since Zimbra burst onto the scene at the Web 2.0 Conference in 2005. So, I’d like to explore the journey from then to the Yahoo acquisition in September of 2007 because it’s a great case study, I think, for aspiring web entrepreneurs. So let’s start by learning a bit more about you yourself. What’s your background? How did you come to startup Zimbra?Satish Dharmaraj: Yes. Well, thank you first of all for the congratulations and the wishes. My personal background: Before I started Zimbra, I was the Vice President of the messaging division at a company called OpenWave, which was essentially a merger between two messaging companies, a mobile company called phone.com and another messaging company called software.com, which together morphed to become OpenWave. It’s a public company. |
| 01:30 | I got to work there because me and my two other cofounders, we did another company called OneBox which was the unified messaging company. It was probably too early for its time, but we got bought by phone.com. Then, that’s how we went there.Before then, actually, all of us had worked at JavaSoft. That’s where we first met. It was at JavaSoft, where during the heydays of Java back in 1985, I was leading the Servlet and JSP teams back then. That was where I met many of the people who today work in Zimbra.The way we came up with the idea was we have always been entrepreneurial, and we’ve always looked for trends in technologies. Back in the Christmas of 2003, I had already quit my job and still had my two other cofounders, Ross and Roland. We were saying, “OK. What’s the next thing that we’re going to be doing?” |
| 02:35 | While we were brainstorming on what ideas, and we cycled through a lot of them, we always kept coming back to, “Oh my god. What are the big things that people do on a computer?” Well, they search and they web browse and they read email. We started believing that more than web browsing and searching, people spend more time on emails than search or web browsing, and we said, “Man, that’s huge.” It seems so evident but that was basically the genesis of, “Well Google is tackling search and, obviously, Firefox and IE are tackling the web browsing issue, and then we have Outlook or Thunderbird or Entourage for email.” Well, that seems really broken. |
| 03:36 | So that’s where we started thinking around maybe there is something where user spends a majority of their time. There isn’t anything as compelling as Firefox or as compelling as Google for email. So, we basically said maybe there’s an option here. We started looking into the market. We looked at Exchange and Outlook, and we set one up and we set that basically determines that..Then at the same time, we were thinking about technologies and how the web browser is becoming the predominant platform of modern day computing. Do we really need to have a desktop app and can we do everything on the server side? That’s something to break into. |
| 04:35 | Richard: OK. So, the genesis of the idea was back in 2003, was it? Like 2003?Satish Dharmaraj: Yes.Richard: OK.Satish Dharmaraj: December 2003.Richard: All right. So how long did it take you to get to the very first sort of alpha version of the product because you launched it October of 2005? |
| 04:55 | Satish Dharmaraj: Yes. So, somewhere around the end of 2004 to like the beginning of 2005. Well, first, we said, “You know what?” We’re going to take a hard look at the problem because the last thing we want to do was to replicate what Microsoft had done. So we launched this company before Gmail came about in April. By some good stroke of coincidence, we had many who had familiarity with Ajax being the big one, but search being the other and harmonization being the other. |
| 05:46 | We already started seeing validation in the market, but early 2005, late 2004, then we were ready with the product, but we didn’t want to release something that wasn’t fully thought of. So we had to email and the contact pieces done but we made the decision that we want to have like a kick ass compelling calendar and group scheduling and sharing piece to it before we launch or we move out to launch on October which falls or coincides with the Web 2.0, and that’s how we launched it in 2005. |
| 06:23 | Richard: So when you unveiled Zimbra in October 2005 at the Web 2.0 Conference, your product was described in the press release as something that will fundamentally change the way people interact with email. You’ve discussed a little bit about that already. Others quoted a challenge to Microsoft Exchange. So at that point, it had pretty big expectations and some people, of course, would say it was hype. What was people’s initial reaction to the product when you launched in October of 2005?Satish Dharmaraj: That’s a very interesting question actually because when you’re sitting inside of a cave and you’re creating a product based on your conviction, the team and you are feeling pretty excited about it, but many times, you come out and people would say, “Yes. No big deal.” Right? So there was always that fear for us. The only people that had ever seen the product or seen our pitch was the venture capitals who funded the company and ourselves. So we thought that it was compelling. We thought that the time had come. |
| 07:34 | A lot of times, a company is successful because the timing of the product coincides with some massive shift in the industry. Right when we were about ready to launch in Web 2.0 in October 2005, that was the Web 2.0 Conference. That’s when Web 2.0 became like a big deal conference. So we were lucky enough to be there. The entire landscape of the computing industry were shifting towards web based apps, and with some great fortitude, we had made that back in 2003 two years ago and had something that basically pushed the edges of Ajax like no one had ever done before when we launched in Web 2.0. |
| 08:19 | People’s reactions to it was unanimously like, “I can’t believe this is a web browser. I can’t believe that this can be done all inside of Ajax and all with a server that’s not hosted or with data that resided remotely. Our goal was to basically blow the pants away of Outlook or any other client in terms of user interactivity even though it was inside of a web browser. I think when we launched, we successfully got that kind of a reaction from people who were just totally wowed with it. They were all extremely excited that somebody was putting up such a huge and competitive product in the mail landscape which people had thought had been written off. |
| 09:05 | Then, for us, we knew in our hearts, and we didn’t want to be a web 2.0 company that’s just all hype and glam. We knew that we had planned all of this carefully with our board. We had always wanted to start making money. It has happened. As soon as we launched in October back before we started making money, before we sold to Yahoo we were handsomely cash flow positive. So we’re always proud of the fact of what we went through as a company, got a lot of bugs, got a great product but at the end of the day, we were making money. That was basically the difference that basically set us apart. |
| 09:46 | Richard: OK. The product at this stage of the Web 2.0 Conference in October of 2005, has it changed a lot from then until now? You obviously kept on iterating on the product, but are there any sort of major new changes or additions to the product that came from October 2005 until now?Satish Dharmaraj: Yes, in a big way. A lot of different things. We launched the product. Again, there are a couple of things. When you push the envelop, and you’re at the frontiers of technology, there are a couple of things. One is integrate because you wow people with things that they haven’t seen before, but then, you’re also suffering from a catch up. So Firefox was already way ahead and then the Ajax came and IE at that point was really catching up. In fact, we were not even working inside IE 5.5 and now IE 6.0. It was very sluggish. We uncovered a bunch of issues that IE 7.0 subsequently fixed very well, but in the meantime, we also decided that we wanted to replicate the exact same interface in HTML rather than Ajax so that we can work across all the browsers and all the computers. |
| 11:10 | Our client had two requirements. One is we wanted a modern computer. So we wanted something with a good CPU and lots of RAM and a modern browser. But we realized that it’s a global economy and we were selling our software all over the world. In many parts of the world, the computer is still running Windows 95, IE 5.5. So we started seeing that, and so we added what we call a standard client and really literally to raise. You can go look at the hosted demo that we have. The standard client and the Ajax client are so close to each other. The only thing that the standard client does not have is the concept of Zimlet, but it still is a very rich client. So we started doing some of that on the browser war side. |
| 12:03 | On the product side, we said we just wanted to not stop with mail and calendar. So we added word editing and spreadsheets and then we put it all together such that Zimlets will work inside of a spreadsheet and you can drag and email onto your mini-cal and the calendar will pop up.Then really, what we did in web 2.0 was get a sense of the excitement of what excited people and subsequently talking to customers. We formalized the Zimlet API, and that was a huge thing because previously to that, we were the only one writing Zimlets but when we formalized it, anybody out there could start writing Zimlets. |
| 12:47 | Richard: Yes. About what time was it that you formalized the API?Satish Dharmaraj: The Zimlet formalizing we did pretty early in the game. So in October, we launched at Web 2.0. By early January 2006, we had started formalizing the Zimlet framework. One of things is we’re the first by a long shot by more than a year now, we still don’t have anybody else doing it; 2.0 launch and offline Ajax app. |
| 13:21 | Again, one of the things that define the way we think is our objective there was we said we’re going to take the entire experience; tagging, searching, conversations, calendar, the whole thing, and bring it offline. It’s not just the most recent one month worth of email or anything like that. It’s like your entire mailbox. You can completely search it in any which way you want. You can tag it and untag it all offline, and we launched that, again, at Web 2.0 last year. So how we are again pushing the envelop in Ajax full running, and we have yet to see any one else launch that. |
| 14:07 | Richard: OK. Great. Let’s sort of board on discussing a little bit and talk about web office as a trend, as a notion, so I named Zimbra the base sort of mini suite in February of 2006. At that point, Zimbra was obviously extremely innovative in this area. Google apps wasn’t really on the horizon at that point, but fast forward to October 2007 and Google was definitely heading in the direction of 100% browser based web office even though there were still lingering questions about security and compliance among other things. So I wanted to find out: Do you personally think that a full-fledged office suite will be 100% online in the near future? Do you think that the desktop is always going to be part of the equation? |
| 14:54 | Satish Dharmaraj: Well, I think the desktop is going to part of the equation. 100% online apps, I think for a certain segment. So we got to answer this looking at the market segment. For a certain segment of the market, we’ve looked at small and medium businesses or enterprises or EDUs. There’s going to be a mix of people. A majority of people will be happy with online apps, but yet, there will be a nontrivial percentage that will want desktop apps. I think there’s a place for both. I do honestly believe that the time for web office has arrived. It’s not going to be an overnight shift, and it’s not going to be today where people are using Word and tomorrow people are going to be using the Ajax editors. |
| 15:46 | The approach that we took was: Let’s make sure that it all fits together well. So when you get a document in email or you get a calendar appointment and there’s an attachment to it, that you can refer to the web dock’s area. Actually in 5.0, we’re coming up with this thing called Briefcase which is a web briefcase. So it’s not just your documents that you created are using the web operating tools but also random files that you can put into the briefcase and then share that briefcase with anybody in the web. Not just with your own domain, but you can share it with anyone in the web with actual protection and security.So the concept we think that it is real and that there is a need in the market and fulfilling it. Putting maybe like 10%, but I think that in the next three years, we will see it go up to where I think 50% of business users can be content with online apps. |
| 16:49 | The problem with the compliance and security and all that stuff that you raised, the approach that we took was say we can give it to you web hosted, but if you’re paranoid about security, and we have some customers who are… Web 2.0 doesn’t necessarily mean that it’s hosted in someone else’s data center. It could be hosted at your data center and yet your users, your end users, have a web 2.0 experience.Like H&R Block was our customer. They host Zimbra in their data centers in Kansas City, however, tax professionals across the country get a web 2.0 experience because they open their browser and they don’t care that his Opera is hosted at Yahoo or Google or Kansas City in an H&R Block. They just get a browser based experience. That’s the approach we took. |
| 17:44 | Then for desktop apps, there are two things that desktop apps bring. One is interactivity and the other is offline. Again, our approach to that was: Let’s provide using a web browser. So when I say there’s room for desktop, I do think that if it’s a completely online world, it’s not going to work because people are going to be offline a number of times no matter, even in the developed countries. So we do need an offline component, and our approach was: Let’s make everything seamless online and offline, and that’s our approach. |
| 18:19 | Richard: So turning now back to the acquisition. When did Yahoo first made inquiries about acquiring Zimbra, and what was the process from there? Basically, how long did it take to do the deal?Satish Dharmaraj: I got to be careful here because I’m under some nondisclosure contracts. Let me just tell you Brad basically was in the audience at Web 2.0 in October 2005. At that time, he was thinking about Yahoo mail data which they had just bought OddPost and were going to launch with that. He said he saw Zimbra and said, “These guys are pushing the envelop.” That’s when I first met Brad; at Web 2.0 in October 2005 interestingly enough. |
| 19:05 | Since then, we’ve keep keeping in touch, and I’ve been telling him, “We’re not competing with you guys for consumer mail but we’re going after EDUs and ISPs and small and medium businesses.” We’ve been keeping track of each other professionally just because they were interested in the Ajax technology and they were pushing it as well.Along the way, all of a sudden, we found that Google was also trying to get into EDUs, SMBs and ISPs. While we started the company thinking Microsoft is going to be our biggest competitor, we ended up finding out that Google turned out to be an equally large competitor of ours. |
| 19:52 | Then, from the Yahoo side, they said, “We have all 250 million mailboxes in Yahoo consumer mail.” We have this fort and we now see that there is a shift where: Someone who goes to school, are they a consumer? Absolutely they are. Someone who works, are they a consumer? Yes, they are. There was a bleeding off technologies from the business onto consumers and vice versa. Right? If you think of a lot of the different technologies that started off as a consumer play and slowly went into business or even vice versa. So they started saying, “Mail is our core platform” and “mail is our core strength. We don’t want to give an inch to any of our competitors to take over mail.” |
| 20:46 | So back in summer, I’ve been told they’ve been thinking about strategically what to do about this for quite some time, but in summer, they called me and said, “What’s going on? Let’s see where you guys are and track progress.” So back in summer, we came back and told them, “We’re brewing all our numbers. We’ve got hundreds of universities and large ISPs and Comcast and everybody signed up.” We were a real force in the market that they were really keen on entering. So they thought they could either build something and try to get into the fray or they buy us, and we are the leader in the market at this time. So we got an easy onramp, and all of a sudden, after the acquisition, they are now the leaders in the space. We are; together. |
| 21:36 | Richard: OK. So the next question. Obviously Yahoo is predominantly consumer focused and you are more of a business office technology. You kind of touched on some of the points that I wanted to ask about, but I’m still not sure how Zimbra is going to be used going forward by Yahoo. Will you guys still cater to that business enterprise customer base or will you sort of focus more on that consumer email space that Yahoo is so strong in? |
| 22:05 | Satish Dharmaraj: Sure. That’s a very good question. I’m so glad that you’re asking it. It’s a big move for Yahoo to buy Zimbra. It’s not one of a technology buyout nor is it a people buyout. The big number basically say that it’s a strategy buyout. The strategy is one of: Let’s evolve the market beyond where we are in the areas of strength. So when you look at Yahoo, they decided that the email was the core strength of theirs and communications, so I am an emailer, our core strength. They felt that they needed to enter this new market in order to go reach out to more people to make it more ubiquitous because they’re just like us, like Zimbra and Google and Microsoft Live, are all seeing a shift towards web based computing. If there is a shift towards web based computing in the business world, then absolutely that Yahoo wants to be a big player in that because they are the largest destination inside the internet. They want to make sure that if there’s a web based technology that’s going to take over the business market, that they have a role to play in web based technology. Basically, Jerry Yang always says that they consider themselves as a platform for the internet. So it was natural they wanted to do that. |
| 23:36 | So this acquisition is specifically about extending their email reach to businesses, to universities and educational institutions to sort of providers and ISPs. They thought that Zimbra was the best vehicle to go reach these three new markets that they couldn’t do with their consumer mail offering.Richard: OK.Satish Dharmaraj: So that’s the strategy. So we’re not going to be enhancing Yahoo consumer mail but we’re going to be going and trying to win and spread the Zimbra dock style to as many EDUs, businesses and ISPs around the world. |
| 24:10 | Richard: Will Zimbra be kind of a standalone unit within Yahoo or will it merge with the other units within Yahoo?Satish Dharmaraj: Absolutely. Zimbra is going to be a standalone unit. I’m the one who said it, and I’m the one who report directly to Brad not as a pure unit to the consumer mail offering.Richard: Good. OK. That’s wonderful. A couple of sort of general questions to finish off. One thing that web 2.0 critics often derive about the current generation of web apps is that they are features and not businesses. Also, the web 2.0 startups have too large a reliance on M&A as the end goal. This is something we constantly hear from critics of web 2.0. Zimbra was obviously a very successful buyout. Was that your plan from the start or did you start out with the aim of being a viable standalone business? Back in October of 2005, what was your end goal for Zimbra at that point? |
| 25:04 | Satish Dharmaraj: Honestly, I can say this. We set out to build a great company with a real business behind it. That’s what I think people should do when they start a business. They got to think about: How do I make this an independently successful cash flow self-sustaining business? Then, there’ll be very interesting M&A opportunities that will come and knock on the door. If instead we start a company thinking that there is going to be a quick flip, it’s almost always 90% of the cases does not work out because no one is interested in buying or they want to buy you off for really cheap or one or the other. We were not thinking of an ideal nor are we thinking of an M&A. We were just thinking” Let’s go and create a compelling product and create some real business in specific markets. That’s what we start out to do and that’s what we did. |
| 26:15 | As I said, before the end, within a few quarters, we were selling a lot of Zimbra mailboxes. Our growth rate, many of our VCs tell us that they’ve never seen a startup grow as crazy as Zimbra did both in terms of mailboxes, in terms of the quality of people that we attracted, and obviously, in terms of the revenues and profitability. We just drew back all the crazy records that startups had set for our VCs. So we were really proud and honored to have done that. An M&A opportunity presented itself, and we thought that it was a great marriage because we think that if the shift is real, then we need a large brand and a large partner to go and get the market. We thought we head back to Seattle. |
| 27:10 | Richard: Right. You mentioned at the start of the interview that you started to make money back in October of 2005. You just mentioned there that you’ve had very good growth over the last couple of years. So was it month by month you were growing?Satish Dharmaraj: Yes, absolutely month by month. We were just like growing crazy month by month.Richard: My last question is kind of to look into your experiences over the last couple of years. You are obviously a successful entrepreneur. So, is there anything that you’ve learned over those last couple of years in this Zimbra journey that perhaps you can pass on to a budding entrepreneur or even that you wish you had known back in October 2005? |
| 27:52 | Satish Dharmaraj: Yes. A few things. One is that at the end of the day, people are everything. Right? So you want to get the right set of people; that’s one.Two, you want to build a product that is innovative. So, you want to build something that basically is compelling enough that everyone wants to see what it is or write about it or think about it or think about how that will change the strategy in the business.Three, one of the things that we did really well was we pretty much went underground for 18 months. If you want to build a big company, then you want to essentially not launch with something that is almost there or levels the playing field. You want to just raise the bar so high that when you come out, you’re already a year and a half ahead of everyone else, and you built something really innovative and compelling. |
| 29:02 | Then finally, this is really important. It’s that we don’t hire a single person who we thought would be overhead. So we didn’t have these lots of EVPs running around. We hired OutCast to do our PR like a month before our launch. Until then, we only hired superstar crazy smart engineers. The biggest thing that probably Zimbra did vis-à-vis most of the startups is that we paid our engineers better than market even as a startup. So we would compete with large companies and beat them in their salaries. Give the engineers a lot of stock. So essentially, what we ended up doing and instead of hiring two average engineers, we would hire one superstar engineer. That basically really helped, I think, in our strategy when we launched to compete. They did a lot of magical things and everything followed from there. |
| 29:31 | Richard: That’s great advice. OK. That’s about it. Time’s up. Thank you very much, Satish, for doing this interview. Congratulations again on the Yahoo deal. I’ve been following Zimbra for two years plus now, so I’m really excited to see what comes up next.Satish Dharmaraj: Thank you very much, Richard. I really appreciate it. |
October 16th, 2007 at 11:32 am
[…] editor Richard MacManus interviewed Satish Dharmaraj, Zimbra co-founder and CEO. The result is a 30 minute podcast available on Read/WriteTalk (transcript included). The following post is highlights from the discussion, which focused on […]
October 18th, 2007 at 2:42 pm
[…] серию подкаст-шоу Read/WriteTalk посвятили интервью с Сатишем Дхармараем (Satish Dharmaraj), сооснователем и исполнительным директором […]