Exchange in the cloud or on the ground?

Following the price cut on the desperately-in-need-of-renaming BPOS services recently, I’ve been talking with a few people about the where the tipping point might be for running Exchange in house vs using some form of hosted provision.


There are plenty of reasons why a hosted offering makes sense. More and more end-users are away from the office (using web access, mobile devices or VPN-less connectivity such as “Outlook Anywhere” that’s been part of Outlook for the last 6 years), and as the user end-point is increasingly mobile, it starts to matter a lot less where the server end is.

In the first 3 versions of Exchange (4.0, 5.0 and 5.5, released in 1997 and 1998), the accepted rule was that servers would be placed in the same location as clumps of users (say, if you have more than 30 users in a remote office and anything other than a great WAN connection, you’d drop an Exchange server on-site).

Since the client and server maintained a constant connection with each other (using MAPI over RPC, if you’re interested), and since wide area networks for most companies were in the few hundred kilobits between sites, the default was pretty much that servers tended to be in the same physical location as the users.

As network capacity improved (and costs fell), combined with server capability improvements (and price reductions, and technology like Outlook cached mode and the shift to using web access as an alternative), it became more feasible for organisations to centralise and consolidate Exchange into one or a few physical locations – such as Microsoft famously did, by moving from many locations in Exchange 2000 to just 3 in Exchange 2003.

So, the position we’re now at is, it pretty much doesn’t matter to an end user whether they’re connecting over a company wide-area network to a remote Exchange server, or if they’re connecting over the internet to one that sits in someone else’s datacenter.

If you’re an organisation with a few hundred users, then you probably don’t have a dedicated Exchange administrator who does nothing but feed and water the email system. Moving to an online hosted model such as Microsoft Online or one of the many “Hosted Exchange” partners who offer a more tailored service, could mean a significantly lower cost of operations when measured over the next few years.

Since Hosted Exchange providers and Microsoft Online will both move towards Exchange 2010 in the near future, it’s something that every current Exchange user should consider – is it time to consider moving some or all of your estate to a hosted environment, or you do have specific requirements around backup retention or data control, that you absolutely need to have your own servers on your own soil? If the latter, then maybe “cloud” based email isn’t for you, but Exchange 2010 “on-premise” would be the right choice.

As part of this discussion, of course, there’s the question of whether all of one or all of the other is the correct approach – a blended model could be the ideal, where some users are on-premise and others (maybe the less demanding) are hosted in the cloud.

Microsoft Online Services prices cut

The snappily-titled Microsoft Business Productivity Online Services (BPOS) offering, announced some price cuts the other day…


I heard from someone internally that the price cuts were driven by increased economy of scale – ie. as more customers signed up for BPOS, the cost per customer of providing the services has fallen, and the saving is being passed on.

There’s an online pricing calculator to get an estimate of what it would cost to adopt, but if we took an example of 250 seats of Exchange Online (ie not the full BPOS suite), it would be around £805 per month, or just under £10,000 per annum.

Now that might sound like a lot for only 250 seats, but if you compare with the license costs to buy a server or two, 250 Client Access Licenses and the Enterprise CAL for email protection, you’d be looking at around £15k for software licenses, plus hardware costs (let’s say another £5-10k) and the staff costs to maintain the Exchange environment. It might start to look pretty attractive to outsource the whole “keeping email running” task, and just pay for it to be online.

Some customers like the online services model since it is an operational expense (OPEX) rather than having capital expenses for servers & storage hardware, which is depreciated over a number of years.

Finally, an example of where Online Services might suit particularly well… one fairly well known company (who shall remain nameless for the moment), were still muddling along on an old Exchange 5.5 environment. On Wednesday, the server shuffled off this mortal coil to join the choir invisible, causing a good deal of consternation in the business, who were now completely without email.

I’ve said for a long time, that Exchange is the only mission critical system in most businesses, which affects everyone immediately. If the CRM or billing or the payroll systems fell over, sure, it would be important – but most people wouldn’t know right away that it had happened. Email goes down, and most businesses will feel pain right away.

Back to example company. As fire rained from the sky, they took the decision at 4:30pm to buy 110 BPOS accounts, which were provisioned in 15 minutes and the business was fully back up with email up and running, later that evening.