Open-Xchange pulls in $20M to help ISPs and hosting providers battle Microsoft and Google

Telecoms companies and old-fashioned hosting providers are all about added value these days – the services they provide are highly commoditized, so they want to differentiate themselves through bolted-on software-as-a-service products such as email and cloud storage.

Enter Open-Xchange, a German company that we recently covered for its innovative OX Documents service, a cloudified office suite built by some of the coders behind OpenOffice. The company has just pulled in a respectable $20 million in funding from service provider United Internet, along with former Deutsche Bank COO Hermann-Josef Lamberti and other existing investors – some of the cash will be used to pay out an early investor whose fund is at the end of its life, but the rest will go towards software development and a further international push.

Open-Xchange CEO Rafael Laguna

Although you’ve probably never heard of the firm, Open-Xchange has around 80 million users for its email and office productivity services, via its 75 service provider customers in 60-odd countries. According to CEO Rafael Laguna, (pictured above)  two-thirds of Open-Xchange’s revenues still come from Europe, but there’s a fair amount of growth elsewhere including in the U.S., where the firm is partnered with Openwave Messaging (customers there include cable companies such as Cox and hosting giant Endurance International Group).

“We’re becoming the web desktop for these guys – any web application that they launch is provided by us,” Laguna told me. “It’s like moving the operating system into the browser, almost – email, cloud storage, file collaboration and then this whole office productivity thing.”

If OX Documents is anything to go by, it’s worth keeping an eye on the software Open-Xchange comes out with. The OX Text app is pretty innovative in its approach to non-destructive collaborative document editing, and bears checking out as an upstart rival to the likes of Microsoft(s msft) Office 365 and Google(s goog) Docs.

As Laguna put it, Open-Xchange’s clients have “realized there’s no way that they as service providers can be a software company at the same time.”

I’d say we’re seeing something vaguely analogous happening outside the software-as-a-service realm with infrastructure outfit OnApp, which is taking things a step further by not only throwing the service providers a cloud-in-a-box lifeline but gathering them up into a pretty powerful federation for compute capacity, storage and content delivery. There generally seems to be a solid business model in scooping up these legacy web service businesses and helping them compete in the modern, cloudified age.