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Volume 5, Number 14 -- April 9, 2008

Options to Microsoft's Hosted E-Mail Abound

Published: April 9, 2008

by Alex Woodie

The rush is on to sign up small and mid size businesses (SMBs) to hosted e-mail contracts. Google and Yahoo, with their 2007 acquisitions of Postini and Zimbra, respectively, are the early leaders in the space, and Microsoft, with its Microsoft Online Services (MOS) for SMB announcement last month, is the latest entry. These Web giants have scale on their sides, but SMBs should be aware of their limitations and alternatives.

E-mail has traditionally lived on servers managed by the people who use it, or by an Internet service provider (ISP). The corporate e-mail market, which is about a $2.5 billion a year business, is dominated by Microsoft Exchange and IBM's Domino, with Exchange enjoying a 62 percent share of the market compared to about 26 percent for Domino, according to Gartner figures from 2007. Novell GroupWise also wins some new clients, but its influence is waning.

But the traditional e-mail server market is shifting. As business customers continue to outsource commodity applications and become more comfortable with the software as a service (SaaS) delivery model, SMBs and large corporations alike are finding that outsourcing their e-mail servers (or just the management of servers that are kept on-site) to outside parties can ease the management burden and cut costs.

Google Mail and Yahoo's Zimbra are the early leaders in hosted e-mail. These offerings sport slick Web 2.0-style interfaces, as well as features like integrated security and archiving. These e-mail offerings, which are said to live in the "cloud" because they're hosted in huge data centers, mainly attract SMB customers who either lack the technical skills needed to run their own e-mail servers, or don't want to give up control of their data in a SaaS environment.

Faced with the competition from Google and Yahoo, Microsoft last month announced its own "cloud-based" offering, dubbed MOS for SMB, through which it will run, in its own data centers, Exchange Server, SharePoint Server, and Office Communications Server for customers with 500 seats or fewer. The company rolled out its MOS offering for companies with thousands of seats last fall.

The MOS for SMB offering is still in a limited beta, with general availability expected in the second half of the year. When it does become available, users will be able to use Outlook to access their e-mail, calendars, and contacts, and also access SharePoint features like shared workspaces and Web conferencing. The new MOS offerings stand in stark contrast to Microsoft's previous e-mail outsourcing strategy, which relied entirely on business partners. Apparently, ceding market share to Yahoo and Google was more painful than disrupting its partnership and reseller channel (although the partners can still get fees for signing up customers to MOS).

While Microsoft is bound to attract its share of customers, SMBs that rely on Exchange should be aware of potential limitations with the MOS for SMB offering, and know about alternatives.

One of the limitations of the first iteration of MOS for SMB is it won't be able to take advantage of the unified messaging features in Exchange, and its capability to hook up to Office Communication Server (OCS). So, users won't be able to access their voice mail as an e-mail attachment, or hear a text-to-speech translation of their e-mail over the phone.

By comparison, Exchange customers who outsource the management of their on-site Exchange servers to Azaleos will be able to take advantage of Exchange-OCS integration, says Scott Gode, vice president of marketing for the company, which has offices in Redmond and Seattle, Washington. Based on conversations that Gode (who joined Azaleos last fall after a 15-year career with Microsoft) has had with Microsoft employees, the hosted version of MOS for OCS--complete with connections to customers' PBX systems--won't be available until late 2008 or early 2009.

Control over the Exchange data, such as movement of Outlook mailboxes, is another area where a hosted e-mail offering such as Azaleos will have advantages over hosted e-mail living "in the cloud," Gode says. "It's a security and a peace of mind issue," he says. "Do you want to have your data onsite with you where you are, or do you want to put it up in the cloud somewhere where you don't know who's looking at it and playing with it?"

Gode gives Microsoft credit for eschewing multi-tenancy with its MOS for SMB offering, and instead guaranteeing that each customer's Exchange or SharePoint environment will run on a dedicated server. But other e-mail outsourcers run multiple clients on the same e-mail server, which can lead to security and reliability issues if an e-mail server is inundated with spam or viruses.

Another company offering alternatives to Microsoft's hosted e-mail offering is PostPath, which sells a Linux-based e-mail server that functions as a "drop in replacement" for Exchange and works with Outlook front-ends.

PostPath CEO Duncan Greatwood says it makes sense for SMBs to look to a SaaS-based e-mail offering to save money, but cautions about the lack of flexibility and vendor lock-in with the MOS for SMB offering.

"Unfortunately, Microsoft's MOS offering remains expensive--the challenges of Exchange, after all, are just being shifted from the customer to the service provider," he says. "Additionally the customer is being forced into an all-Microsoft infrastructure, so for instance the customer may be left high and dry if they want to use BlackBerry for mobile or Webex for collaboration."

Hosted e-mail is becoming an increasingly attractive way that customers can reduce costs and reduce the management burden of running servers in-house. However, users should realize they'll be giving up some degree of flexibility and security in exchange for the "plug and play" capability they get by relying on Google, Yahoo, and Microsoft to run their servers. In these situations, customers would do well to explore the alternatives.


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