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Moving Exchange to the Cloud, Part 1

Experience Exchange with low cost, high flexibility

As evidenced in announcements and product introductions at events such as the Microsoft Professional Developers Conference in 2008 and 2009 regarding Microsoft Azure, Microsoft Online Services, and new web-based versions of some Office applications, Microsoft has declared its strategic intent to be a major player in cloud-based computing. Chris Capossela, Microsoft senior vice president for Office, was widely quoted at the time predicting that 50 percent of the Microsoft Exchange Server installed base will be online by 2013. Some of these mailboxes will come from the existing installed base and some will come through migrations from other email systems such as Lotus Notes (see

The data includes mailboxes that Microsoft will migrate to Exchange between now and 2013, but it’s still a lofty goal to transform half of an installed base from one computing model to another in four years. Commentators such as the Radicati Group predict that hosted email seats will grow by 40 percent by 2012 (, largely driven by deployments within small and medium companies. They also predict that large enterprises will increasingly analyze the value that hosted email can deliver, especially for regional offices. Recent economic weaknesses will make CIOs consider how to save costs wherever they can. The ability to move to a fixed-cost offering is attractive, especially when Microsoft and Google are competing to reduce prices. Microsoft announced a reduction to $10 per user, per month for Business Online Suite in November 2009. This price point gets close to Google’s pricing for Google Apps Premier Edition (GAPE) while offering a familiar and more functional offering. All in all, it’s a good time to be a buyer of email services.

As Microsoft prepares for the deployment of Exchange Server 2010 as the basis of its managed email service, it’s likely that the company will encourage customers to assess Microsoft Online as an upgrade option. In reviewing the options that will exist for customers in the 2009-2012 timeframe, three major possibilities present themselves for companies that run Exchange:

  • Continue to operate an in-house deployment of Exchange. This includes variations such as traditional outsourcing to companies that operate Exchange either in your data center or theirs, or that place servers in client data centers and manage the servers remotely.
  • Embrace the cloud and move mailboxes to Microsoft Online Services. You'll go through a migration phase to move mailboxes to the cloud, but eventually all in-house mailbox servers that run Exchange will be eliminated unless you decide to keep some for specific user communities such as executives. However, even if you move all mailboxes to online services, some in-house servers will still be required to host Active Directory (AD) and to manage synchronization between the on-premise and online worlds, as well as other applications that don't function in the cloud.
  • Take a hybrid approach. You’ll move only those users to Microsoft Online who need the functionality delivered by a utility email service. You can then retain part of the current infrastructure to continue to run Exchange for specific user populations.

New companies that don't currently have an email system installed should absolutely consider cloud computing for email services, because this approach lets them start to use the latest version of email technology immediately. They can grow capacity on an on-demand basis and take advantage of the latest technology that’s maintained by the service provider. Those who have an existing user base and a legacy IT infrastructure to deal with have some other problems to consider. For example, many large companies have integrated the provisioning of an email mailbox into their HR systems so that a mailbox and an email address are automatically created when new employees join. Processes like this take time to amend, especially when you deal with global companies that operate in multiple countries.

So What’s in the Cloud?

One definition of cloud computing is “IT resources accessed through the Internet.” Consumers have no obligation to buy hardware, pay software licenses, perform administration, or do anything else. They only need to have the necessary connectivity to the Internet to be able to access the service.

Cloud infrastructures are based on different OSs (Linux is a popular choice), but their operators put considerable effort into simplifying and securing the software stack that they use to drive performance and reliability. These infrastructures focus on scaling out rather than scaling up, preferring to use thousands of low-cost servers rather than fewer large servers. Applications are built using open standards such as SMTP, IMAP, POP3, and TLS so that as many users as possible can connect and use them. Google uses its own version of Linux running on commodity “white box” hardware, its own file system, storage drivers, and applications to deliver a completely integrated and fit-for-purpose cloud computing platform.

In many respects, you can compare the integrated nature of Google’s platform with that delivered by the mainframe or minicomputer in the 1980s and 1990s. As you’d expect, Microsoft’s cloud platform is based on Windows, albeit with a high degree of attention to standardization and virtualization to achieve the necessary efficiency within the large data centers that the company has built out in the United States and Ireland.

Why the Cloud Is Feasible

Over the past few years, technology advances have provided evidence to enterprises that including cloud platforms as part of their IT strategy is becoming an increasingly feasible and cost-effective strategy. Three examples of advances that have made cloud-based services more feasible are greater and cheaper access to high-quality Internet connections; the work done by companies such as Google to demonstrate that high-quality applications function on the cloud platform; and the growing comfort that users have on a personal level to store even their most personal data such as family photographs or financial data in sites such as or

For Exchange, three developments are worth noting:


  • Advances in consumer experience. Email applications such as Hotmail, Gmail, and Yahoo! Mail have created familiarity with the concept of accessing email everywhere through any device. Many people who use Exchange at work also have a free, web-based email account for personal email. These web-based providers run on a cloud platform, and while the majority of client access is through web browsers, some users connect to them with other clients, including Microsoft Outlook. Although service outages are possible with cloud-based providers, the overwhelming user experience is likely to be positive. Users get the feeling that if it’s possible to host personal email in the cloud, it should be possible to host enterprise email, too.
  • The advent of RPC over HTTP. The elimination of the requirement to connect to corporate email systems via VPNs demonstrates that it's possible to securely connect clients to email across the Internet. This capability has been available since Microsoft shipped Outlook 2003 and Exchange Server 2003, but Microsoft greatly improved the setup and administration of RPC over HTTP in Outlook 2007 and Exchange Server 2007. RPC over HTTP technology is now widely used, and Windows Server 2008 now includes the Net.TCP service to allow multiple services to share TCP ports for communication across HTTP.
  • Outlook running in Cached Exchange Mode. Cached Exchange Mode is now the de facto deployment standard for Outlook clients. Cached mode insulates users from temporary network outages by letting them continue to work with a local cache that's constantly refreshed through synchronization with the server. Cached mode therefore helps enterprises maintain a high level of user confidence that they can continue to get their work done while connected to the Internet. Unlike carefully managed corporate networks, no one controls the Internet. Having the confidence that the Internet is sufficiently reliable to give clients consistent access to online services is of huge importance for companies when they consider moving away from on-premise services.

Economics of the Cloud

The trick that Microsoft now wants to perform is to transform part of its revenue stream into subscription services for access to applications such as Exchange, SharePoint, and Office Communications Server (OCS) without cutting its own throat by eliminating the rich stream of software licenses consumed for traditional in-house deployments of these applications. At the same time, Microsoft knows that it has a huge competitor in Google, who has driven the market with GAPE, with a price point of around $60 per user, per year, which has attracted the attention of many CIOs, who now question how much they're paying for applications such as Exchange. Microsoft had to respond, and the company delivered in such a way as to be price-competitive but also feature-rich. Microsoft can’t succeed against Google if its prices are way out of line, and it can’t satisfy its customers unless the online versions of its applications offer comparable functionality to what customers have today. The coupling of Microsoft’s price reduction for its online suite announced in November 2009 with the extra functionality enabled by Exchange 2010 ratchets up the competition between Microsoft and Google.

To achieve the necessary economics in the delivery of feature-rich applications at a compelling price point, the infrastructure to deliver cloud computing services is designed to scale to hundreds of millions of users, flexible in terms of its ability to handle demand, and to be multi-tenant but private. In other words, the same infrastructure can support many different companies but an individual company’s data is private and confidential. In addition, companies can have their own identity within the shared infrastructure. Microsoft has invested billions of dollars to build data centers in the United States and Europe to support the provision of online services to customers. According to Microsoft, as of November 2009, online services were available on a commercial or trial basis in 36 countries.

Exchange Upgrades

One advantage of online services is that online applications such as Exchange and SharePoint can be automatically updated to the latest version. You don’t have to worry about testing and applying hotfixes, security updates, service packs, or even deploying a brand new release of Exchange. Everything happens automatically when Microsoft rolls out new software releases on a regular basis across its multi-tenant data centers.

Always having easy access to the latest application can be advantageous, but only if it doesn’t increase costs by requiring client upgrades. For example, Exchange 2010 doesn’t support Outlook 2000 clients; it requires you to use Outlook 2003 SP1 at a minimum. However, you need Outlook 2010 (which won’t be available until sometime in mid-2010) to access the full range of features offered by Exchange 2010. Therefore, to move to a hosted service based on Exchange 2010, you have to be sure that all of your clients run either Outlook Web Access(OWA) or a client that's fully compatible with Exchange 2010. Outlook 2007 SP1 is the closest full-function client available for Exchange 2010 today.

You can predict that the same situation will continue to exist. OWA clients will be automatically upgraded in line with the server, but administrators will have to ensure that fat clients such as Outlook can connect. Microsoft typically provides backward compatibility only for recent clients, so client-side upgrades are always a possibility whether you use an in-house or hosted version of Exchange. The problem here is that although you have complete control over upgrades when you run in-house Exchange servers, you cede control to the hosting provider when you use an online service. If a hosting provider decides to apply an upgrade on its servers, there may be a domino effect requiring customers to either accept lower functionality or, in the worst case, not be able to connect with clients running on some or all desktops.

Managing Cloud-Based Deployments

Forced upgrades to new versions of desktop software might be an acceptable price to pay in order to take advantage of online services. However, no administrator will be happy to upgrade clients (or to even apply a service pack or hotfix) without warning or consultation. Particularly with bigger client populations in an organization, the costs to deploy or upgrade are larger, and it can be more difficult to ensure that all clients are running the right desktop software. A forced and unexpected upgrade at the wrong time could have enormous consequences for a business.

Through bitter experience, enterprise administrators have become aware of the need to synchronize client and server upgrades and to plan upgrades to match the needs of their organization. For example, it could be devastating to plan an upgrade to occur at the end of a fiscal year when users depend on absolute stability in their email system to send documents around, process orders, and finalize end-of-year results. Enterprise administrators also know about the other hidden costs that can lie behind client software upgrades. For example, you probably don’t want to deploy Outlook 2010 without deploying the other Office 2010 applications because of the user interface changes that are common across the entire application suite. If you do, you’ll automatically take a large hit on the time and testing needed to deploy. There is also the need to prepare users for the upgrade, and prepare your Help desk staff for a potential increase in workload and costs.

In an online world where services are truly utilitarian in nature, you might not have the luxury to dictate when client upgrades occur unless you use browser-based clients such as OWA. Consumer-oriented email services such as Hotmail and Gmail have always focused on web clients and therefore haven’t needed to synchronize client and server upgrades. Perhaps we will all be able to use web clients in the future and eliminate fat clients such as Outlook. Until this happens online, service providers will have to work out how to perform software upgrades on their servers without forcing client-side upgrades on their enterprise customers.

Clients are only part of the management challenges that moving to an online service might pose for a company. In the second part of this article, we’ll consider some other issues that may slow you down, such as compliance, legal issues, and managing service level agreements (SLAs).

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