Microsoft Exchange Online Dominates On-Premise

I recently had the opportunity to work through a scenario with one of our Vancouver-based clients who was allured by the recently announced move by RIM to make Blackberry Enterprise Server Express (BES Express) free. This particular client is currently running with a Hosted Exchange provider and looking at moving to Microsoft's Exchange Online (part of the Business Productivity Online Suite - BPOS) to save costs and gain access to the other additional benefits such as Office Communications Online (instant messaging), Live Meeting, etc.

The announcement by RIM made this client consider bringing the Exchange Server and BES in-house / on-premise as Blackberry licensing was one of the major additional costs they were concerned about. We formulated a couple of interesting thoughts on this topic, providing some realistic total cost of ownership calculations based on comparing the 3-year TCO for a 25-user Exchange & BES Express deployment / migration with Microsoft's cloud-based BPOS offering.

The "Build-Your-Own" Exchange Server Approach

• $6,175 - Licensing: Exchange 2010 Standard Edition & Windows Server 2008 and associated CALs (client access licenses) for 25 users
• $1,000 - Anti-Virus & Anti-Spam licensing specific to Exchange / e-mail filtering over 3 years
• $5,500 - Hardware: Dedicated server for Exchange and BES Server (whether running within the same server or as a separate VM)
• $5,000 - Services: Installation and configuration of Exchange & BES servers (assuming 10 BES users)
• $3,600 - Backup Service: Assuming 100GB @ $1/GB/Month (Online Backup) x 36 Months
• $5,400 - Connectivity Upgrade: Additional internet capacity (assuming upgrade of $150/month) to ensure remote worker productivity
• $10,800 - Management Services: Assuming $300/month fixed fee for additional servers (outsourced) or 6% of $60K/Year IT Network Administrator / IT Manager x 36 months

Total Cost of Ownership: In-House Exchange (3 Years) - $37,475

The Microsoft Online Services / Exchange Online Approach

This is pretty staggering for a small 25-person shop, it's no wonder people have been looking for alternatives to Exchange and glancing over at Google Apps! Now, let's break down the TCO for a Microsoft Online Services Exchange Online deployment:

• $5,733 - Microsoft Online Services / Exchange Online - 25 users x $6.37/User/Month x 36 Months
• $4,586 - Microsoft Online Services / Blackberry Enterprise - 10 users x $12.74/User/Month x 36 Months
• $3,600 - Management Services: Assuming $1200/year for Cloud Services management (outsourced) or 2% of $60K/Year IT Network Administrator / IT Manager x 36 months

Total Cost of Ownership: Microsoft Exchange Online (3 Years) - $13,919

This doesn't speak to the many advantages of the Microsoft Exchange Online offering, which include:

• A big advantage of hosting mission-critical systems in the cloud is that they are inherently more robust - particularly a cloud belonging to and supported by Microsoft, made up of over thousands of servers worldwide (wow!). The typical internal office / corporate network (even in fairly large organizations) have multiple single points of failure from the switch to the firewall to the ISP, etc. An issue with one of these will take the system down, impacting not only users in the office but remote users working on e-mail/mobile devices.  Should your internal systems go down, you can walk to a internet café, jump on a wireless network, or work off your handheld until such time as the system is repaired – I only wish this was a possibility with all applications!
• Hosting a system like Exchange internally also lends itself to scalability and lifecycle issues – by scalability, I am referring to the obvious disk, memory and CPU limitations of any hardware solution you purchase. In “the cloud” those resources are dynamically assigned and can scale up (or down) with your business seamlessly. Compare that with having to buy a new, bigger, faster server and replace it every 3 years (along with buying the latest licensing), and I think the scale starts to tip rapidly in favour of the cloud.
• The total cost of running in Microsoft’s cloud is likely to drop year-over-year as collaboration hosted solutions drive at an accelerated pace towards commodity. The reality is that in a couple of years it may be free, the unfortunate situation for Microsoft is that Google is driving this! Luckily, Microsoft's offering is much more tuned for the enterprise, so Google still has some work to do if they want to compete in this space and I believe that the extra cost associated with Microsoft Online Services vs. Google Apps is easily justified.

In the end, while we are happy to continue selling Exchange servers, the reality is that our clients are starting to scrutinize the return on investment (ROI) of an in-house Exchange solution. This is not to say that many of our clients won't continue having their own Exchange infrastructure - those who have an issue with data in the cloud are still fighting to keep these systems under their control. We are also seeing a lot of clients moving away from Hosted Exchange and towards to Microsoft BPOS / Online Services / Exchange approach. The conclusion I have reached is that the barriers are coming down, and it turns out for the most part that very few organizations in the Lower Mainland are too worried about their data in the cloud (rightly or wrongly!). After reading this, are you interested in looking at Microsoft Online Services?