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Long relegated as a parlor trick for small businesses, hosted or SAAS (software as a service) e-mail systems from Google, Microsoft, Yahoo Zimbra, Cisco PostPath and others have become more viable in the low-end of large enterprises.
SAAS or cloud-based e-mail systems are cost effective for companies or divisions up to 15,000 users, determined Forrester Research analyst Ted Schadler, who surveyed IT professionals at 53 North American and European enterprises to find out where they run their e-mail and other messaging and collaboration services.
Schadler found that while cloud-based email has historically appealed to small businesses, the costs and hassles of managing on-premise e-mail combined with the growing capabilities of Google, Microsoft and others means that SAAS providers’ sweet spot is growing to customers with up to 15,000 mailboxes. Schadler added:
For example, the cost per user, per month for cloud shops of 25,000 users was $23.05 per user, per month, while the on-premise cost for the same amount of users was $22.52. However, Schadler found that nothing beats Google on price.
As has been widely documented, Google set the stage for low-cost e-mail and archiving in the cloud with the launch of Google Apps Premier Edition for $50 per user, per year, or $4.17 per user, per month). Factoring in costs for staffing and message archiving and Schadler puts the total at $8.47 per use, per month.
Schadler said he believes Google can make money at this price, while properly servicing bigger customers like Genentech and Avago Technologies. Google made a believer out of Serena Software, which is moving its employees to Gmail, and possibly additional Google Apps.
Cloud E-mail from Google, Microsoft Is Cost Effective
But lest he get too bullish, Schadler said he expects stronger mobile support for Gmail, as well as the long-awaited offline Gmail and Google calendar support.
Once a non-factor in the SAAS space, Microsoft entered the cloud messaging space in 2008 with Exchange Online Standard, which at an average cost of $8.66 per user, per month is double Google’s rate. Costs escalate to $20.32 per person, per month once staffing, message archiving and client software is factored in.
Google Apps, anyway one looks at it, appear cheaper, which could prove attractive for cost-constrained companies in 2009.
Meanwhile, of the 53 firms Forrester surveyed, 36 are considering a change in their e-mail services, with seven planning to put their e-mail data in the servers of a cloud-based provider, such as Google, Microsoft, Cisco or Yahoo.
However, in a validation of Microsoft’s software-plus-services model, 20 of those companies said a hybrid model looks attractive, keeping their mailbox servers in their corporate data center but running inbound e-mail spam and virus filtering as a cloud-based service to pare e-mail volume.
Why? Primarily, lower costs, as one financial services firm told Schadler:
If that model holds up across the industry in the coming years, that leaves plenty of room room for Google and Microsoft at the table for SAAS e-mail. Moreover, Schadler found that price transparency will drive e-mail costs down because vendors will continually vie to provide cost advantages to separate from the pack.
Other benefits of floating into the cloud include: the ability to rapidly provision new users; allocate IT professionals to more business-centric projects rather than tending to e-mail servers; no upgrade hassles for IT; and the cloud lets CFOs shift the financial burden from upfront capital expense to ongoing operating expense, a boon during the recession.