To Host or Not To Host?

Like it or not, outsourcing has become a common practice in the IT world. Companies frequently outsource functions that are important but not part of the company's core business—-for example, payroll processing, employee benefits, and repair of returned equipment. Some companies have gone so far as to outsource their messaging operations. For instance, one large Fortune 500 company near my home hires an outside company to maintain and operate all its Exchange servers. Hosted Exchange Server solutions (in which you pay a per-mailbox fee and use Exchange servers that a hosting company manages) are gaining in popularity. Does hosted Exchange make sense for your organization?

The first issue to consider, not surprisingly, is the total cost. Microsoft, IBM, Novell, and other messaging vendors love to talk about total cost of ownership (TCO) and how their systems' TCO figures stack up against their competitors'. The fact that hosted Exchange exists implies that Exchange can have significantly lower TCO than its competition--otherwise, the hosting companies would lose money. Consider the basic economics for two companies, one with 75 mailboxes and one with 500: The smaller company can buy one small server, a copy of Small Business Server (SBS) 2003, and a total of 75 Client Access Licenses (CALs); the larger company will need a larger server, Exchange Server 2003, and 500 CALs. I'm not going to try to estimate the cost of actual Exchange licenses, since it varies widely depending on what licensing plan you buy under. But Microsoft has a special licensing plan for hosting providers, which means they're almost certainly paying less per CAL than either of our sample companies would. Either company, though, can pay a monthly per-mailbox fee (ranging from $8 to $20, depending on the hosting company) to get access to a hosted service and save the cost of the server, OS, and CALs. Let's say that each organization chooses a vendor that charges $15 per mailbox per month. That's a total outlay of $1125 per month ($13,500 annually) for the smaller company and $7500 per month ($90,000 annually) for the larger one. And take a look at what else the companies don't have to pay for if they use a hosted configuration:

- Email administrators. The smaller company probably wouldn't have a full-time Exchange administrator, but the larger company might. Using a hosted service negates the need for that position, potentially saving a significant amount of money.

- Utility software. Using a hosted service means you don't need any antivirus, antispam, or backup software licenses--the hosting company takes care of all that. (Of course, you'll want to evaluate hosting providers based at least in part on what tools they use and how well they use them.)

- Hardware maintenance. Purchase cost is only the tip of the hardware iceberg. Maintenance and support costs, which can be avoided by using a hosted service, can add up fairly quickly.

When you factor in these savings, hosting can begin to look awfully good. Whether your experience lives up to the promise will, of course, depend on the quality of the hosting company you pick. Here are some things to consider when you're investigating such companies. In a typical hosted configuration, your mailboxes will be on a machine shared by several organizations. Find out what the provider's sharing policy is and whether you can get a dedicated server if your capacity or security requirements demand it.

Speaking of security, some hosting providers allow raw remote procedure call (RPC) access for older Outlook clients. Better hosts provide VPN access to accommodate client access without exposing the server. The best providers, of course, will support RPC publishing with Microsoft Internet Security and Acceleration (ISA) Server and Microsoft Office Outlook 2003's RPC over HTTP Secure (HTTPS). Consider carefully whether the providers you're thinking of hiring have better or worse security practices than your own organization.

Get service level agreements (SLAs) in writing. A provider's refusal to commit in writing to a specific availability level bespeaks a certain casual attitude toward uptime that might not fit with your requirements. In particular, make sure you understand what the hosting company's disaster recovery guarantees and time lines are.

Find out which features cost extra. Some companies charge extra for Outlook Web Access (OWA) or VPN access, others charge extra for spam filtering, and some even charge a setup fee for additional mailboxes. Make sure you understand the total cost of using the hosting provider, and don't focus only on the per-mailbox fee (especially because some companies offer signup incentives that lower the fees for the first few billing periods).

If you carefully consider these factors, you may well find that using a hosted Exchange solution can save you money that you can put to good use elsewhere. But before you leap into anything, be sure that hosting can give you the control and flexibility your business requires.