As we predicted just a couple of weeks ago in our 2010 Top 10 SMB Technology Predictions, the collaboration battle is heating up! VMware just announced that has entered into a definitive agreement with Yahoo! to acquire Zimbra, which provides email and collaboration software.

Financial terms weren’t disclosed, but under the terms of the agreement, VMware will buy all Zimbra technology and intellectual property.  Yahoo! will continue to have the right to use Zimbra technology in its communications services. Perhaps most interesting, Zimbra has about 55 million paid mailboxes—many of which are in small and medium businesses—which VMware will support as well.

The Zimbra acquisition gives VMware an email and collaboration solution of its own that it can package with its desktop virtualization solutions, cross-sell to existing VMware customers, or sell as a standalone solution. Zimbra enables VMware to diversify, giving the vendor another entrée into the coveted small and medium business market. Especially at the lower end of this market, where core virtualization solutions can be a very tough sell, Zimbra provides an alternative path to customers—and revenues.

As noted in our 2010 Top Ten SMB Predictions, email and collaboration are universal–everyone uses them, no matter their role or function in a business. This makes this area extremely attractive to an expanding array of vendors, many of whom are venturing into this territory for the first time. As web-based collaboration solutions replace traditional systems, VMware can ride into the race on a strong horse.