Monday, March 19, 2007

Microsoft Exchange: In-house or hosted?

After my eDiscovery post, I received several emails asking questions about email archiving, email security and the eDiscovery requirements. However, the most intriguing of these questions was brought up by David Spark, a fellow blogger. David was interested in discussing the decision companies need to make regarding hosting their own Microsoft Exchange implementation or outsourcing it.

It's a great question. For many SMBs, their email system is an absolutely critical piece of their infrastructure. So, if it's that critical, it should stay inside, right? You should trust your own people to maintain it and make sure it is always available, right? Well, maybe not.

What do you need to make sure your Exchange environment supports your business needs and compliance requirements?
  1. It needs to be available.
  2. It needs to be secure.
  3. It needs to be redundant.
  4. It needs to be archived (to support eDiscovery requirements).

To reach these goals with a high degree of proficiency, it requires you to invest in hardware, software, backup and archiving systems and training for your team - not to mention the labor required to perform the maintenance, account changes, security, backups and troubleshooting.

On the other hand, if you outsource your Exchange, you look to your vendor to meet these requirements. But this should be their specialty. While in-hosting requires your team to be experts in something that is NOT your core business, outsourcing allows you to take advantage of your vendor's expertise - since this IS their business.

Moreover, when you in-source, you pay ALL of the costs associated with implementing and supporting the Exchange environment. When you outsource, the vendor is able to leverage the implementation and support costs across all of their clients, which should result in significant savings to you.

But these are vague arguments. Let's take a look at a specific example.

Exchange Hosting: A Total Cost Analysis

The following comparison is a real-world examination of the costs to implement and support a complete Microsoft Exchange environment for a 250-person health care organization.

In-house Exchange Hosting Costs (36 Month Analysis)

Server (HP LS385 Cluster - Dual Core) $14,700.00
Cluster pack software $140.00
24 X 7 service pack, on-site 4 hour $3,500.00

Backup software Upgrade $35,000.00
Backup software Install $14,000.00
Staff training for backup software $6,000.00

Windows 2003 Exchange Cluster edition $3,500.00
Windows 2003 Exchange CALs $18,750.00
Exchange upgrade, install, migration $8,000.00
Outlook upgrade licenses $37,500.00

Symantec Archive Evault $22,000.00
Archive server $9,700.00
Windows 2003 license $700.00
24 X 7 service pack, on-site 4 hour $1,200.00
Symantec Archive Evault install $3,000.00

Exchange training for network staff $6,000.00

.5 FTE for 3 years $120,000.00

Total $303,690.00

On the other hand, this same company was able to outsource their Exchange implementation, including archiving, email encryption (which wasn't even included in the above analysis), 24x7 support and greater redundancy than the above solution provides - all for less than $200,000!

While it's true that you have to be careful that you select the right vendor, you can take active steps to make a good choice. Your vendor should be able to guarantee specific up-time standards - at least 99.99%. Your vendor should be able to demonstrate significant security proficiency. And most importantly, your vendor MUST be able to give you at least five references who are using the same services you would be using. Make sure you speak with these references and ask them about their experiences with up-time and support issues.

So there it is. The numbers provided here scale pretty similarly, whether you are a larger or smaller organization. If you're an SMB and you're implementing Exchange internally - I strongly suggest that you consider looking into outsourcing.

This is admittedly a high-level analysis of this issue. I started this post by introducing you to David Spark. I'll finish it that way, too. Among his other act ivies, David is managing a Microsoft-sponsored wiki white paper on this very topic. Check it out:

If you have additional questions or thoughts, I'd love to hear them. Feel free to post comments or to email me at


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