Hosted Exchange Server adoption to infiltrate the enterprise

Get a look at how the hosted Exchange Server market is expected to grow and if it's as viable for large Exchange enterprises as it is for SMBs

Microsoft Exchange Server hosting -- using a third party to manage corporate email -- can be beneficial to companies lacking space or resources to administer what they consider to be their most important business application.

The Exchange hosting market has maintained a modest end-user audience for the past five years primarily among small and medium-sized businesses (SMBs) looking to offset cost and complexity. But interest in outsourcing beyond SMBs might grow thanks to a surprising source -- a little friendly competition from Microsoft itself.

While SMBs have held as the sweet spot for hosted Exchange, price reductions and new vendors entering the market may entice enterprises. The number of enterprise seats using hosted Exchange Server is projected to grow from 1% of seats in 2007 to 20% seats in 2012, according to a report from Gartner Inc.

Microsoft intended Exchange Server to be an easy-to-use, on-premise messaging platform. SMBs that seek out third-party Exchange hosting providers do so for various reasons. Hosted Exchange can cut the amount of time that IT administrators spend keeping systems up and running, and keeping releases current and patched.

The three C's of outsourced Exchange

"The desire to look at hosted Exchange is driven, for the most part, by companies that like Exchange Server and want to keep it," said Mark Levitt, analyst for IDC. "But they want to deliver it either at a lower cost or lower overhead in terms of time and administration."

The migration within companies from Exchange 5.5 to Exchange 2000 Server or beyond also played into a rise in outsourcing once Microsoft ended support for Exchange 5.5. Exchange Server 2007's 64-bit server requirement also compelled companies to outsource because many didn't want to upgrade their servers just for one application. The three main reasons for selecting a hosted Exchange Server solution are cost, control and complexity.

Cost issues aren't just about simple dollars and cents. It also takes into consideration staff size, training needs and hardware expenses. This was the primary reason that Coinstar, of Bellevue, Wash., chose to host Exchange Server after migrating off of Lotus Notes.

"We did not have enough mailboxes to justify a full-time administrator, and we were in the process of re-training our Notes admin," says Christie Liebe, CIO at Coinstar. "We also didn't have the resources to provide 7 x 24 support."

Coinstar also was interested in maintaining control of its servers by managing them in the company's own data center. The company chose to use managed services from Seattle-based Azaleos Corp. Coinstar chose an option where its Exchange servers remain at the customer site. Azaleos manages the servers remotely.

More on Microsoft Exchange Server hosting:
Hosted email will boom in the short term, study says

Migrating from hosted email to an in-house Exchange server

Understanding the hosted messaging market

Hosted Microsoft Exchange on campus fuels Google vs. Microsoft fight

As Exchange Server grows from simple email to being more of an underlying platform for more complex services such as unified messaging and unified communications, companies are more apt to consider handing over the reins. "They're saying that this is a foundational application that, if companies don't do right, they won't be able to keep their costs down or deliver the functionality that business users require," Levitt said.

The need for email storage also creates demand for hosted services, according to the Gartner report. The 200-MB email storage cap most administrators set for email has many organizations archiving messages to save them, instead of relying on a storage area network (SAN). Hosting providers can help reduce the cost of storage that likely isn't available to many enterprises. Hosting models that can offer nearly five times the storage space for the same money begin to seem more attractive.

Moving further into the enterprise

SMBs can easily move to hosted Exchange because they don't have a large messaging infrastructure to displace. It's far more involved to get a large company to host its messaging platform than an SMB with only 50 or 100 employees.

But there are some enterprises with 100,000-plus seats that are moving to hosted Exchange, said David Sengupta, a SearchExchange.com contributor and Microsoft Exchange MVP. "It's compelling for a certain price point for many companies," he added.

Microsoft is pushing its own hosted services on large enterprises whose needs aren't being met, which may tempt others to follow.

Michelle Boisvert is the Features Editor for SearchExchange.com.

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