Scalix Corporation Case

Analyzed by Neha Rasagya Pranjal Prasad Saurabh Ankur

Research
Mayfield A venture capital firm Offers resources to support to entrepreneurs with specific domain expertise Farris organized a roundtable with CIOs to discuss challenges & concerns in running mails Major players Microsoft & IBM (total 89% market share) Vendors use proprietary tech and interdependencies to raise switching costs and ensure customer retention Eg: Interdependencies between MS Exchange, Outlook, Active Directory & windows platform

Research
LOTUS IBM
45% share in 2002 Wide range of solutions in addition to email and software applications Mixed up and confused portfolio Losing market share Expensive Email - Only useful feature

NOVELL
Served smaller enterprises Selling though partner network Slow attrition and new emerging customers

ORACLE
Released 1st level OCS in 2002 Released 2nd level OCS in 2003 Highly scalable

Findings
People are never happy with their email systems Email More important to business than it has ever been Ubiquitous communication tool CIOs haven t spent lot of time doing cost benefit analysis Running email both costly and complex Concerns fear of email s security, reliability & tech infra

Opportunity
Gap between customer s requirement and Microsoft product Unhappy CIOs Scope for a Linux based solution with better e- mail design Obtained license for HP s OpenMail Product (OMP) Farris familiarity with tech architecture of OMP OMP more reliable than MS Exchange 5.5 Intel Server - 1000 users HP Box - 5000 users

Opportunity Xchange 2003

Microsoft announced discounting support for 5.5 with 65% still on it Message from MS: Upgrade or bear the increased cost People were converting Unix apps to Linux

Go to Market
Recruit a high powered enterprise sales veteran Sell direct to CIOs @ medium & large enterprises Phil Lavery joins Scalix as VP,Sales Inability to strike a deal with Sprint Structured discussion at CIO Level to figure out 1. Problems with existing mail infra 2. Views towards Linux 3. Probability of shift to Linux Scalix claim 40-50% savings on TCO Hired experienced field reps in Chicago & New York

Go to Market
Issues with Scalix Limited 3rd party product support More features offered by Exchange like competitive web client, Outlook XP Support & wireless support

Market Response
Challenge of establishing credibility Lack of customer base Capital One Deployed 12000 seats of Exchange 5.5 Aggressive & Inclination towards Linux Lack of skill set or comfort to switch to Linux Learning :- Rethinking of another strategy for selling to CIO/CTOs Operations people the real reason behind failed deal

Market Response
Perot Systems Ran a pilot, the 1st of its kind at enterprise level Discovered that the product wasn t ready End users wanted integration with security and identity management Learning : Difficult to convince CIOs to switch Other developments Huge success of Exchange 2003 with new features Lead conversion halt at 2nd or 3rd meeting without reaching the CIO level meeting Competitive threats to Scalix on Linux Eg : Stalker Software, Bynari

Public Sector
Potential & opportunity in the state of Iowa and Indiana with 300 and 800 seats respectively Sales to Pottawattamie & Bloomington County Linux - the differentiator and selling point Public and higher education sectors promising Learning Better to tap smaller markets first Telesales better than sales cycle

Issues
Fallible sales model Promise of low cost not impressive at CIO Level Linux adoption yet truly to penetrate MS no longer a weakened state Emerging competitors