Microsoft's Yammer Buy Raises Questions About NewsGator's Future

When NewsGator Technologies decided to play in the nascent enterprise social collaboration market a few years ago with a product that worked only with Microsoft's SharePoint, it was making a big bet.

It was gambling that by making a deeply integrated SharePoint add-on, it would carve a profitable niche that was different from the broader opportunity pursued by competitors with vendor-agnostic products.

Until last week, the gamble seemed to have paid off. NewsGator's Social Sites, launched in 2007, has 4 million paid seats and hundreds of Fortune 2000 customers. The client roster includes JP Morgan Chase, Kraft Foods and Barclays.

However, Microsoft's announcement this week that it is acquiring Yammer for US$1.2 billion has raised questions about NewsGator's future. If Microsoft fuses Yammer's product with SharePoint, will there still be a need for Social Sites?

Until now, Social Sites has been able to remain relevant because Microsoft never boosted its internal development of enterprise social capabilities in SharePoint to the point of replicating the functionality of the NewsGator product.

But with Yammer that could change.

NewsGator CEO J.B. Holston downplayed the concerns, saying Social Sites is better integrated with SharePoint and appeals to a different type of customer.

While Yammer is a multi-tenant, cloud-based software, Social Sites is designed for on-premise and dedicated hosted environments, offering IT more controls, he said.

"The fact that Microsoft now owns Yammer doesn't change the reasons why our clients came to us originally," he said, adding that most NewsGator customers aren't comfortable using this type of software in a multi-tenant cloud. "Our customers are hyper-focused on security, governance, scalability and privacy."

Nucleus Research's analyst Rebecca Wettemann said that NewsGator provides a level of integration with SharePoint and capabilities "beyond what Yammer does today."

"NewsGator has let enterprises have an enterprise-class social collaboration environment with broad governance and IT capabilities, as well as the social collaboration features customers are looking for," she said. "Social Sites is for large organizations that want to be able to manage their social collaboration applications like any other enterprise application."

Still, Yammer, which was founded in 2008 and has about 300 employees, also boasts adoption of its product by big enterprises. Its software is used by more than 5 million corporate users and in more than 85 percent of the Fortune 500 companies. It offers a basic free version of its software and three fee-based tiers. About 200,000 businesses use Yammer in more than 150 countries, including Deloitte, which rolled out Yammer to 190,000 employees. Yammer adds about 250,000 corporate end users every month. Other big customers include Tyco, Ford and Nationwide Insurance.

Microsoft was in close communication with NewsGator as soon as the Yammer acquisition rumors erupted in mid-June, and again this week after the deal became official, Holston said.

"Microsoft has told us: 'You guys are our premier social partner for the enterprise and we want you to be that for the long term,'" he said.

However, when asked for comment about NewsGator, Microsoft provided a statement that sounds less enthusiastic and supportive.

Asked whether it considers Social Sites the most tightly integrated enterprise social module for SharePoint, or at least one of the most integrated, Microsoft said: "We have a number of partners that use SharePoint as a platform to build high-value social solutions. NewsGator is one of these partners."

Asked to comment specifically on how the Yammer acquisition impacts Microsoft's relationship with NewsGator and the future of Social Sites, Microsoft said: "We have a number of partners offering strong connects to SharePoint for enterprise social. We have a great partner ecosystem and NewsGator is an important part of that."

Holston also believes that Microsoft's main interest in Yammer isn't its intellectual property but rather its successfully viral freemium business model.

In any case, NewsGator is focused on developing applications for specific industries, because the core set of horizontal enterprise social features -- such as microblogging, employee profiles, activity streams, sharing and joint editing of documents and content rating, tagging and reviewing -- are becoming commodities, he said.

Not only do pure-play enterprise social networking vendors all provide those horizontal features, but they are being added natively by broader collaboration and enterprise application vendors to their software stacks, he said.

"Our road map was always focused on taking advantage of higher value-added social business applications anyhow because of the assumption that horizontal capabilities would be provided by other means," he said.

This is the right approach for NewsGator, because there is no doubt that Microsoft will eventually meld Yammer with SharePoint, said IDC analyst Michael Fauscette.

"NewsGator needs to continue to figure out ways to differentiate itself," he said. "They're good software developers, have a good company and good products. Maybe they'll broaden their business and not depend mostly on SharePoint."

But even if Microsoft were to replicate Social Sites with the Yammer functionality in SharePoint, that process would likely take at least two years, Holston said.

And NewsGator has been working closely with Microsoft as the next major upgrade of SharePoint is developed, to make sure Social Sites is properly integrated and aligned with it, he said.

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

Source: http://feeds.pcworld.com/click.phdo?i=9ae224604679902ad980e9b7511e300a

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