Cisco is putting up $215 million for PostPath so it can include the company's e-mail and calendaring software in Cisco's upcoming collaboration service, WebEx Connect. But the software could also become a component in a unified communications bundle that businesses buy outright, industry observers say. (Compare Unified Communications products.)

Cisco says it plans to put PostPath Server in the cloud and sell an e-mail and calendaring service to its customers, packaged with the instant messaging, collaboration, wikis and document-sharing capabilities already in the beta version of WebEx Connect.

"Our 'cloud-based' delivery model offers our customers rapid deployment and compelling economics," says Doug Dennerline, senior vice president of Cisco's Collaboration Software Group (CSG).

But the set of applications available in this software-as-a-service model could be attractive as a software package that businesses buy and manage themselves, says Alex Lewis, a senior consultant at IT consulting firm Convergent Computing, and a Microsoft Subnet blogger.

Combining Cisco Call Manager, WebEx and PostPath would make a credible unified communications platform, Lewis says. "The potential downside is that Cisco isn't known as a software company, and completing the technology integration might be challenging for them," he says.

Another downside for Cisco is the existing competition, says Michael Osterman, principal in Osterman Research, a consultant on messaging and collaboration, and author of Network World's Unified Communications newsletter. "The on-premises market is quite competitive, and Exchange is well-entrenched, which is why Cisco may want to offer it only as a service," says Osterman.

The upsides are PostPath's native compatibility with Microsoft Outlook and its pricing. "It is the only Exchange alternative that does not require a plug-in to work with Outlook, and its admin and licensing costs tend to be lower than for Exchange," Osterman says.

As for the intended WebEx Connect software-as-a-service offering, the economics are particularly compelling to small businesses, says Brad Shimmin, an analyst with Current Analysis.

"PostPath can offer an alternative to Microsoft's hosted Exchange service," he says. PostPath is less mature than Exchange, but the WebEx Connect service with PostPath may still be attractive, particularly among small and midsize businesses, he says. "These customers will look at WebEx Connect and say this is scalable and secure and better than any IT infrastructure I can put together, and the cost differential is night and day."