Hosted Exchange Server Makes More Sense Than Ever

The down economy and the need to do more with less have businesses moving their messaging to the cloud

Executive Summary:
Outsourcing your messaging needs to a hosted Exchange Server provider can save your organization money and provide additional services. Security, antivirus, and antispam are commonly included in hosted Exchange services, and you can usually add additional services such as email archiving, mobile device support, and migration assistance. Although companies frequently cite security concerns as a reason they don't use hosted messaging, hosted Exchange providers have the resources for dedicated security specialists. Most hosted providers agree that Microsoft's entrance into the online services market with Exchange Online, while creating another major competitor, lends credibility to the space, which is a factor in the growing market.

You're struggling to get all the work done in your IT department as it is. The usual cycle of patch management never ends; now it's time to test new versions of applications and updated OSs. You're working on reduced budgets, possibly with reduced staff. And, oh yeah, your company execs somehow want you to provide more functionality to users so everyone can be more productive.

This situation isn't unique to the IT department; in a down economy, every business division is dealing with similar pressures to do more with less. However, few departments have such a direct impact on all the others as the IT department. Naturally, something's got to give—and hopefully not your sanity. Outsourcing tasks to a service provider is an option that might save time, effort, and resources, and one area many businesses are currently examining for outsourcing is messaging. Let's take a look at what hosted messaging—specifically, hosted Microsoft Exchange—offers, and what you can expect to find if you're considering outsourcing your messaging needs.

Is Hosted Exchange Ready for Your Business?
Email is the primary means of exchanging business communications both internally with employees and externally with clients and business partners. It's also your calendar and scheduler. It's how you stay connected when traveling or working remotely, either through web mail or mobile device support. It serves as a document exchanger and, in many cases, a massive filing cabinet for company memos, presentations, and other important documents. Maybe you've implemented unified communications (UC) through Microsoft Exchange Server 2007 so that Exchange also acts as your company PBX and voice mail system.

Exchange Server can be your company's complete communications hub. An immediate question, then, is can you retain all this functionality if you outsource your messaging infrastructure? A quick scan of the marketplace shows there are many hosting providers, including Microsoft itself, that offer Exchange as a hosted service. Some smaller providers don't include every feature of Exchange, particularly more advanced features such as UC. But there are plenty of providers that offer the full-featured Exchange package, so if that's what you need, you'll be able to find it. Vendors distinguish themselves by the additional services they provide.

Hosted providers offer service level agreements (SLAs) that spell out what sort of uptime the service guarantees as well as what penalty the provider will pay if it fails to meet its uptime commitment. Most large providers offer something in the range of 99.9 percent to 99.999 percent uptime; this number might vary depending on whether you subscribe to the provider's standard service or if you upgrade to a dedicated server option. began offering a 100 percent uptime guarantee for its dedicated Exchange hosting option two years ago; Apptix recently began offering a 100 percent uptime guarantee for its Apptix OnDemand hosted Exchange service. With the massive data centers that are possible and the improved high-availability story through continuous replication in Exchange 2007, I wouldn't be surprised to see more service providers begin offering a 100 percent uptime guarantee.

Basic security, antivirus, antispam, and some level of support or Help desk are usually included at no additional fee, and often you can pay extra for premium services in these areas. Most hosted services also give you the option to pay for extra services: email archiving; mobile device support, including Windows Mobile, BlackBerry, iPhone, and others; and fax support through email are common add-ons. Larger Exchange hosting services can provide SharePoint and Microsoft Office Communications Server (OCS) as well.

Migration services are a big plus, if offered. As Danny Essner, director of marketing for Intermedia said, "I think one of the dirty secrets of hosted services in general, not just email but SaaS \[Software as a Service\] as a category, is SaaS is great when you're using a product for the first time. What happens when you've been using a legacy product for five, ten, fifteen years and you have all that legacy data that you want to carry forward to the hosted model? A lot of hosted providers don't handle migration very well." Intermedia has what it calls the Exchange Concierge team to help users manage migrations, and most of the top players in hosted Exchange now have some form of migration service, either offered free or at an additional charge.

As you take a look at the variety of services offered by Exchange hosters, it should be clear how much you can potentially eliminate from your inhouse infrastructure with a hosted solution. The provider has high availability covered for you, which can save you significantly on hardware and other resources. If you take advantage of something like email archiving, you get storage in the cloud and reduced headaches related to email quotas and e-discovery requests. Each feature you outsource frees up something—or someone—inhouse to be redirected at another task.

And you get all this with predictable monthly costs—which is a key point made by Kirk Averett, director of product for Rackspace. "CFOs like predictable costs. And when you're hosting email inhouse, it feels very unpredictable," Averett said. "The hardware can die at any time. You have to go spend 5 or 10 or 20 grand to replace something. Or the software will become broken or incompatible with the backups—you just don't know what's going to happen that will change your costs." Planning your budget, certainly, becomes easier when you host your messaging.

Is Your Business Ready for Hosted Exchange?
Another important question to ask as you look at the hosted Exchange market is if you and your organization are ready to give up some control of your messaging infrastructure. If you go the hosted route to Exchange, it's not like you can sign a contract and then forget all about your email system; no matter what options you choose, there still needs to be IT oversight of the hosted implementation. Sure, you're ceding a certain amount of control to your hosting partner for security, message hygiene, availability. But even with inhouse Exchange, can you say that your security never has a lapse, that spam never gets through, or that unforeseen problems don't cause downtime?

Speaking to this point, Dave R. Taylor, cofounder and chief marketing officer of IT and business solutions provider Sparxent, said, "One of the reasons people stay \[with on-premises Exchange installations\] is, they'll call it security, they'll call it whatever they want, but really it's familiarity, it's comfort. 'It's the way we've been doing it, this is the way we're going to keep doing it.'" Security typically is the stated sticking point for organizations that say they need to maintain their own messaging systems. With data-protection regulations, this might be a legitimate reason in some cases.

Most organizations don't have dedicated messaging specialists; managing Exchange is just one of the many tasks on your IT platter. Hosted providers, meanwhile, have the resources for dedicated Exchange specialists, dedicated security specialists, and any number of other specialists to troubleshoot problems before clients are ever affected by them. As vice president of product for Apptix, Rick Rumbarger, said, "A small enterprise really can't have a dedicated security person. So I would suggest not that we're doing a good enough job \[with security\], but that we actually do a much superior job than what they can ever afford to do because, again, we have people that live and breathe email—that's what they do all day long."

A good indication of a hosted provider's commitment to security is whether the service is SAS 70 Type II certified. SAS 70 is an independent assessment of a service organization that looks at the company's internal controls. This designation has become more important because of legislation such as the Sarbanes-Oxley Act (SOX) and Gramm-Leach-Blighley Act (GLBA), which require the level of auditing that SAS 70 Type II checks for. Yet you'll find that not all Exchange providers have attained this certification.

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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