Exchange Options: Is It Time to Make a Move?

By Stephanie Jordan
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Email continues to be a critical application for any organization, regardless of size. With Microsoft Corp. launching the beta of Exchange 2010 in April, thoughts of upcoming mail server migration prompted the question: When is the right time to make a move? The answer really depends on the organization and the needs of that organization. The move itself is vastly different too. For some it will be an on-premise migration from one version of Exchange to another, for others it might be a move toward Exchange from a POP-based email system or perhaps it is time to let someone else manage the day-to-day tasks associated with Exchange by selecting a hosted model. Or maybe Exchange isn’t in the picture at all, and an alternative is preferred. The good news: There is no shortage of options. Now for the bad news: There is no shortage of options. It takes solid planning, and time invested to evaluate when to move, and to which option. The following offers some thought-points, whether for the on-premise option, the hosted option, or an alternative altogether.

Hosted Exchange

Who is currently choosing to go the hosted route? It’s an interesting study. “We just took a fresh look at that,” says Danny Essner, director of marketing for Intermedia. “It is almost evenly split about 50/50. Half of our customers come from a legacy on-premise version of Exchange and the other come from some hosted version of a POP/IMAP provider or ISP.” Of those that have on-premise Exchange, Essner says most are coming from a legacy version. “Those that have already invested in Exchange 2007 tend to see less value in a hosted solution, unless they are having a phenomenal level of difficulty with the ‘07 environment. Once organizations invest in the upfront costs of buying the 64bit hardware, the software, etc. the switching costs are perceived to be much higher. A lot of times customers that come to Intermedia, or who in general are looking at hosted Exchange, are those that have what we call the dead or dying category. They are on old hardware, maybe Exchange 5.5 or Exchange 2000 or 2003. They are at a natural point of their lifecycle where they are looking to do some upgrade to the infrastructure. That means evaluating Exchange 2007 and facing a migration process. That creates a natural chasm to look at other options. We often enter the exploration phase at that point.”

AppRiver has a similar customer split. “There are a lot of people that have Web/POP email that are looking for a high-performance collaboration email system like Exchange—most of those folks are coming from a hosted environment offering inexpensive, and very basic email,” explains Scott Cutler, executive vice president for AppRiver. “A lot of our customers are coming from that environment looking for the benefits you can get from a rich collaborative email system. There are also a lot of customers that have email internally that do not want to run it themselves anymore.” Cutler continues by noting that today’s email has become so much more complex, that some organizations do not want to manage that level of complexity. “It’s an awful lot of work now. There is so much pollution, in viruses, phishing attempts, spam, etc. Managing email in-house now is not just an email system; it is blocking spam, phishing and viruses. It is managing the growing complexity of the email content itself. Over the years, the size of email has grown, attachment sizes are growing, and storage requirements are growing, so backups for storing in-house have become more complex. And there is the archiving, compliance and discovery that hovers around email.”

For the organization that is on some sort of standard POP mail solution, the step toward Exchange is very clear: business grade email. “Especially in the economy today, the benefit is increased productivity,” observes Randy Ide, senior product manager of messaging products for XO Concentric. “Things like: shared calendaring and resource management and shared tasks, collaboration and mobility. In terms of our customer base, we have offered POP mail since the mid-90s, so we have tons and tons of POP customers. One of the biggest drivers for a smaller customer wanting to come to Exchange is the full mobile synchronization that you get with Exchange for your calendars, contacts and your tasks. Especially if you are a small company where you wear lots of hats and you are out and about a lot. Being able to have all that information at your fingertips, all the time, is really quite valuable.”

The lure of business grade email is very compelling. “In terms of the collaborative features shared calendaring, the public folder access, the group scheduling, that is a big step up,” agrees Essner. “If your business is at a point where those pieces of functionality will increase productivity, that is a factor to consider.”

Making the Choice

Whether moving from on-premise or upgrading to Exchange for the first time, there are a number of questions to consider. Cutler offers this advice: “What are your email and collaboration requirements around messaging? You need to explore that. Then it moves to a discussion about how much can you afford and which model looks less expensive for you? Today is a tough economy, and in a tough economy people are looking for ways to reduce costs and looking for ways to reduce risk. People are saying: ‘I do not need to have someone run my internal infrastructure because it is not going to get me more customers, so I do not want to spend money there’.” Cutler believes that survival is about having more customers and that the link between having more customers and managing email in-house has been cut. “I think hosted email is a trailblazer for all kinds of other applications. It is a mission critical application, and if you can do it with email, you can do it with a lot of other applications.”

What Is the Real TCO?

The age old debate for on-premise versus hosted has always included total cost of ownership (TCO). There seems to be some disagreement on which model is the least expensive. “A lot of folks running their own on-premise server today do not understand the full TCO,” thinks Ide. “They are beginning to more and more, and there is a lot of information out there to educate them. We have a whitepaper by Michael Osterman from Osterman Research that talks about total cost of ownership for running on-premise Exchange. When you consider everything—your hardware, software, licenses, the labor to keep it running and put in the patches, the upgrades, the risk of downtime and the cost of potential down time—according to the whitepaper, and other research including from Radicati Group, it is less expensive to outsource Exchange.”

Essner also believes that the hosted model is the less expensive one. “A lot of customers make the wrong comparisons and think they can do it cheaper in-house,” he says. “When they make that analysis they often make an apple to oranges comparison. Often they are not looking at environment, where like at Intermedia you have a cluster of multiple servers for high-availability, you have high redundancy storage, multiple layers of security, as well as daily and weekly back-up processes. You have to look at the full cost of replicating the infrastructure, maybe not to the scale of a hosted provider. Is there the same level of redundancy, of availability, of security, that I get with one of the tier-one hosting providers? Not a chance.” Essner goes on to say that calculations do not always accurately account for the ongoing needs of the system. “People forget Exchange is by no means a ‘set it and forget it’ type of solution.” For an example he offers Patch Tuesday. “Those need to be downloaded, tested in a test environment to make sure they do not break anything, and then deployed into production. The environment needs to be constantly monitored, it not the kind of thing that you turn on a box and let it run. It needs a lot of tender loving care.”

Echoing the others, Cutler agrees that TCO is not always calculated with all the factors taken into account. “I would not argue with someone who says, ‘I can run email for less money in-house’,” he admits. “The whole equation might include email protection, the staff to run the system, how much to train the staff. It could also include the opportunity cost for not having those people focused on maintaining your existing accounts and clients or adding new ones. When you look at the whole picture it is a really cost-effective alternative. It isn’t the only one, I’m not saying that, but a lot of the elements today make it really compelling.”

There are tools to help organizations more accurately estimate TCO. Ide mentions that there are a number of TCO calculators out there from hosting providers including the one Concentric’s sales force uses. “In the fall we will launch a really robust online TCO calculator that will break down all of the components that make up the cost of running Exchange internally, and all the assumptions behind it. It will even let them go in and change the assumptions so that they can get a true TCO for a five-year cost of ownership. In many cases, for smaller companies the savings can be over 50 percent, and even large organizations can be in the range of 30 percent.”

Microsoft’s Own Offering

Recently David Ferris, senior analyst at Ferris Research, posed the question: “Which hosted Exchange vendors will survive? After all, Microsoft is now offering its own version of hosted Exchange. And Microsoft’s offering is good, and very attractive. Some will survive by competing on price. Most others will survive by competing on functionality; e.g., better service, or better integration with third-party tools such as BlackBerry, or better integration with industry-specific applications.” Ferris did predict that many of today’s hosted Exchange suppliers would disappear. The vendors were philosophical about their latest competition. “Microsoft’s Exchange Online validates for all of us the value of hosted,” states Ide. “While it is still true today, but changing rapidly, is the perception that hosting is for very small organizations. If you have 20 to 50, then hosted is for you and if you have 100 to 200 to 500 to 1,000 employees, then our solution should be internal. I think by Microsoft doing what they are doing, it raises the visibility of hosting and the value proposition of hosting overall. So in that regard, it actually helps us quite a bit.”

Concedes Essner, “There is a certain degree of competition, just by the nature of the fact that they offer the same core offerings that Intermedia does. But they bring many more benefits to us, and to the industry in general, than harm. The general hosted market for email, specifically hosted Exchange, is a relatively new market and a relatively small market compared to the size of email in general. The benefit that Microsoft brings is their infinite resources to educate the market, and raise awareness about hosted Exchange. I think it will bring a lot more attention to our category in general. But at the same time, they’re a competitor and I think that we and the other tier one providers will have to be innovative about how we differentiate ourselves from Microsoft so that we can offer a unique value proposition.”

Most all agree that the differentiation will be, as Ferris stated, in functionality and third-party offerings. “There is a great deal of variety of what kind of features are available from different hosted models,” says Cutler. “It is not one-size fits all. Not everybody wants to do hosted email with Microsoft, and all of the different players offer different functionality in their hosted Exchange models. The options include encryption, archiving, email protection, Web protection. What you will find is a lot of additional functionality showing up. Microsoft will be limited by what they can offer, partly because of the way they work with their channel. They don’t offer Blackberry support as an example.”

Making the Move

While Exchange 2010 is coming in the near future, some are already expressing interest in the hosted version. “At the end of May, we began providing our customers, as well as the general public, with a hosted version of the Exchange 2010 beta,” says Essner. “Anyone can come to our Web site (www.exchange2010beta.com/) and sign up for the beta program and play with Exchange 2010. Our goal is two fold. One is we want to let our customers start getting a feel for the new features mostly through the new Outlook Web Access interface, and two, it also allows Intermedia to begin stress-testing the infrastructure so we can be prepared to offer 2010 in a commercial environment when Microsoft launches. As of today, we have a few hundred organizations and a few thousand users that are test-driving Exchange 2010.

The ones in the hot seat for making choices are those running legacy Exchange versions. “Those organizations on Exchange 2003 and earlier are faced with the decision point of upgrading,” observes Ide. “Microsoft has made that upgrade expensive from a resource standpoint. It’s not just a matter of sticking in a CD and scheduling some down time. It typically means entirely new hardware, entirely new software, which is akin to putting in a new mail infrastructure and migrating users over, so there is a real cost to them. The operation of Exchange 2007 is a little more sophisticated, a lot of the things that used to be done via an elegant user interface is now done by a command line interface, so you need additional training as well. So when you look at all of those factors together, it becomes a real obvious time for people to consider alternatives. They are going to have to do some kind of migration soon, even if it’s to an on-premise solution.”

As a relatively new market, as Essner pointed out, hosting is gaining ground. “There is actually a growing variety of Exchange solutions now,” states Cutler. “Microsoft for its part is very interested in choice. They want to be sure an organization that wants to get into Exchange have all the necessary choices. Email has grown to be a mission critical function within any organization, but there isn’t a competitive advantage for doing a good job of email internally,” points out Cutler. “I don’t think companies are looking to remove headcount for an application like email, they want to re-purpose that headcount for other things that drive more competitive advantage for the company. But no one wants to sacrifice the quality of email.”

Published July 2, 2009