What Microsoft Means to the Market
Exchange as a hosted service isn't a new thing. However, one thing that is fairly new is Microsoft itself selling Exchange as a service. The company originally announced Microsoft Online Services (MOS) in September 2007, then released Exchange Online from beta in November 2008. Microsoft continues to work with its partner resellers who offer hosted Exchange as well—a situation that might look a bit peculiar on the surface.
I spoke to John Betz, director of product management with MOS, about the company's entry into this space. "There's clearly a transformation happening in the market to cloud services," Betz said. "With the advent of the massive data center, there's an opportunity, and customers are looking for ways to be more efficient with how they spend their IT dollars. In the case of Exchange specifically, we expect the opportunity to be up to 50 percent of the seats sold, say, in five years will be in the cloud as opposed to run on-premises. So that's a pretty significant shift that we saw happening." Betz also mentioned that his team had briefed its partners about their plans a couple years before the public announcement.
Nonetheless, I suspect some of those partners might have felt a bit betrayed by Microsoft entering into direct competition with them, selling a product the third-party vendors have to purchase from Microsoft to resell. And yet, after talking with many of these vendors, the general feeling seems to be that Microsoft's entry into the hosted Exchange market lends credibility to the space. As Essner of Intermedia said, "[Microsoft's] entrance alone will accelerate and expand adoption rates, especially in the SMB community. I think they'll help dispel some of the unwarranted fears about security, about reliability, certainly about cost. The best part of the Microsoft initiative is the education and awareness that it will bring." Education leads to acceptance, and as a result, Microsoft has reported some big customer wins for its hosted Exchange service, such as Eddie Bauer, Pitney Bowes, and GlaxoSmithKline.
Microsoft partner resellers have the opportunity to win in this competition by the additional services and support they can provide. For instance, if you want to host Exchange with BlackBerry support, you can pretty much be sure Microsoft isn't going to have what you need—but many third-party providers will. And if you want a security solution other than Forefront, which is built in to Microsoft's offering, well, you'll need to expand your search. Microsoft continues to stress its reliance on its partners as well.
A Radicati Group analysis from August 2009 reports, "The number of deployed Microsoft Hosted Exchange mailboxes is 39 million in 2009, and is expected to reach 77 million by year-end 2013. This represents an average annual growth rate of 19% over the next four years." That's nearly double in just four years. How much of that growth can be blamed on—or credited to—Microsoft isn't clear, but by all predictions, this continues to be a growing market.
Another factor that might influence this growth is the release of Microsoft Exchange Server 2010. Expected to be available by the end of 2009, this is the first version of Exchange developed and tested specifically with hosted deployments in mind. In addition to improved high availability architecture and better performance, Exchange 2010 can be deployed without the need for the Microsoft Solution for Hosted Messaging and Collaboration (HMC) platform for management, which previous versions of Exchange required. A few vendors, such as Intermedia, have developed their own management platform rather than relying on HMC; it's unclear how they'll be affected by this change in Exchange 2010.
Money, Money, Money
Wrapped up in all the other reasons for the growth in hosted Exchange is the money. Microsoft and others have been touting cloud computing heavily for the past few years. Add to that an economic cataclysm, and suddenly outsourcing starts looking like a real attractive option. As Microsoft's Betz said, "You have to decide what you want to spend your time and attention on. Presumably, we can run a pretty standardized version of Exchange or SharePoint faster, better, cheaper than a customer can run it themselves if they're not going to do anything fancy with the deployment."
So, businesses are saving money by moving to hosted Exchange, and at the same time hosting providers are in stiff competition, lowering prices, and offering some pretty nice deals. Rumbarger from Apptix said, "As the competitive nature of our industry has driven down prices . . . the ROI of somebody to have an on-premises piece of equipment—servers, infrastructure, staffing, patching, if they want to have any redundancy like we do with clustering, and things like that—there's no comparison in today's modern environment between what the cost is for someone to maintain on-premises versus in the cloud."
To make their services more attractive, most of the hosted providers are offering some form of messaging suite where you get a package of products for a reduced price. Microsoft perhaps has the best-known suite on the market with its Business Productivity Online Suite. BPOS combines Exchange Online, SharePoint Online, Office Live Meeting, and Office Communications Online for a base price of $15 per user per month; individually, these services would cost $24.25 per user per month. Microsoft offers Exchange Online by itself for $10 per user per month, so if you can use those other services, BPOS is quite a deal.
Meanwhile, many of the third-party hosting providers are including SharePoint with their Exchange hosting at no additional charge. Apptix, Intermedia, and SherWeb all currently make this offer. The catch is that you have limited storage; if you need more, you'll need to upgrade to the company's full hosted version of SharePoint, and pay accordingly. Another hot point of competition is mailbox size—3GB and 4GB standard mailboxes are readily available. In addition to saving money by switching to a hosted Exchange provider, you might find yourself with those extra features for productivity that the bosses have been clamoring for.
How Does IT Benefit?
Outsourcing definitely has its negative connotations, but you can turn this situation into a positive. Email is vital to business life, but it might not be the IT project that has the greatest impact on your business. Outsourcing messaging frees your IT department to focus on those projects of greater impact—to develop instead of simply maintaining.
Doug Howard, president of USA.NET, spoke to this point when he said, "[Outsourcing] allows the IT expert to kind of move up a notch by being able to now manage the platform and the infrastructure and the outsourcer versus actually having to do the hands-on, every little element—patch management and all those elements that are inherently built in to the infrastructure." It can be an opportunity for the IT pro to demonstrate versatility, creativity, and leadership—and maybe even have a little fun while you're at it.
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