Microsoft to buy e-mail managed services company

Microsoft Wednesday bolstered both its managed services and messaging security investments with plans to acquire FrontBridge Technologies, a company that provides managed services for e-mail security, compliance and availability, executives from both companies said.

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The terms of the deal, which the companies expect to close before the end of September, were not disclosed. Microsoft plans to integrate Marina del Ray, Calif.-based FrontBridge and its 160 employees as part of the Exchange Server Group, said Dave Thompson, corporate vice president of the Exchange division at Microsoft.

FrontBridge provides managed services to ensure a company's messaging infrastructure is secure, that its e-mail is always available and that e-mail archiving requirements are compliant with current government regulations, Thompson said. These services are in line with key demands Microsoft customers have made about their e-mail and messaging services, he said.

"There are basically two major dimensions that are critical to all customers," Thompson said. "E-mail has to be always available and secondly, and more complex, there are environmental factors that make it hostile in terms of virus attacks and spam, [which is] a challenge for compliance. You have to archive and store e-mail for certain types of business regulations, and to do this you need to protect the information flow with policy."

Industry analyst Matt Cain said that providing what he termed "e-mail hygiene" products and services is popular at the moment, and Microsoft and more traditional security companies are especially interested in cashing in on the trend.

"There is an intense need for e-mail hygiene services that's growing all the time," said Cain, a vice president with research firm Gartner Inc. "It's certainly a hot market, and we do expect further consolidation."

Symantec Corp. recently bought two companies in this space, Brightmail Inc. and TurnTide Inc., he added. Other companies providing similar products and services include Tumbleweed Communications Corp. and CipherTrust Inc.

While Microsoft is building this kind of technology into the next version of Exchange, code-named Exchange Server 12, the company also wanted to give customers the option of having these services hosted and managed for them rather than having to build out a secure messaging infrastructure themselves, Thompson said. Exchange Server 12 is expected to be released in the second half of 2006.

"We realized it was important for customers to have choice, that for some the solution that might be best for them was to have a managed service that runs certain pieces of e-mail infrastructure on their behalf," he said.

Indeed, Gartner's Cain said that providing secure messaging and e-mail archiving services in a hosted way is "turning out to be particularly attractive" for companies.

Selling managed services in general is becoming increasingly popular, with many major vendors and services providers embracing the business model as a way to give customers alternative ways of managing their software and hardware infrastructure. An entire crop of new companies called managed services providers has emerged over the past several years that focus exclusively on selling these services.

Until now, Microsoft's managed services offering for businesses has been confined to Live Meeting, its Web conferencing service acquired from Placeware Inc. in 2003, Thompson said. However, at the recent Microsoft Worldwide Partner Conference in Minneapolis, Microsoft Chief Executive Officer (CEO) Steve Ballmer stated that Microsoft plans to make more investments in offering managed services to its customers.

FrontBridge's services are "platform-agnostic," and will remain that way even after the acquisition, said Steve Jillings, CEO of FrontBridge. While the bulk of FrontBridge's customers use Exchange, the company also has a substantial number of IBM Lotus Notes customers who will continue to be supported, he said.

"We have Notes customers, and we are intent on providing top-quality services for our Notes install base and for Notes customers who use our services in the future," Jillings said.

FrontBridge has a series of data centers across the U.S. and overseas in Paris, London and Frankfurt, Germany, where it manages and hosts its services, Jillings said.

FrontBridge offers the bulk of these services through partners such as AT&T Corp., VeriSign Inc. and Sprint Corp., which private-label the service to their customers. Microsoft will continue to support this partner-centric focus, a key reason acquisition by the vendor was so attractive, he said.

"We've been approached by many large organizations to acquire us, but for most the fit wasn't right because there was a conflict with our partners," Jillings said. "This was a perfect match."