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Open-Xchange nabs $9 million to fight Exchange

Open-Xchange faces an uphill battle as it tries to persuade enterprises to dump Exchange for a small, open-source provider of email.

Open-source email company Open-Xchange has raised a $9 million Series B round in a difficult financing environment, bringing its total funding to $17.8 million.

With this fresh infusion of cash Open-Xchange is expected to mount a more serious challenge to Microsoft's ubiquitous Exchange product. Open-Xchange claims 8.4 million paid mailboxes worldwide.

The real question for the company will be how to expand into enterprises. Most open-source software companies tend to infiltrate enterprises at the departmental level, proliferating from an initially small beachhead. Email, however, doesn't really work this way. Unlike an ECM or CRM system, it's tough to go off the company's Exchange or Domino grid to dally with Open-Xchange. It's a bit of an all-or-nothing approach.

This may work with SMB customers and in certain market segments (Education?), but it's a tough slog in large enterprises which may very well despise Exchange or Domino...but struggle to abandon either. It would be fascinating to hear how the company plans to use its cash to tackle the enterprise.

It will also be interesting to see how it fares against Zimbra. There was a possibility of Zimbra getting buried in the Yahoo! mess, but the opposite seems to have happened. Zimbra's business has accelerated within Yahoo!, making life a bit more difficult for Open-Xchange.