The Skinny On Microsoft Exchange Hosted Services

Microsoft’s idea here is to sell Exchange-based email accounts as a hosted service, with a monthly per-user price of less than $2. Those email accounts will have antivirus and spam filtering capabilities, among some other basic features.

That may sound like a bargain compared to the cost of onsite storage, mail servers and security technology, but the fact remains that today’s compliance-driven market needs more than filtered email.

With that in mind, Microsoft is offering add-on capabilities to EHS, but they can turn the offering into an expensive alternative to traditional technologies. For example, adding long-term archiving will run $17.25 per user permonth for 3.6 Gbytes of storage. Other options include continuity services at an additional $2.50 per user and encryption for $1.90 per user per month. The continuity services guarantees fast recovery from outages and a 30-day rolling historical mail store. So adding all of the options together brings the cost to more than $23 per user per month.

Those looking to get into the software as a service or managed services market could surely build a less expensive offering and bring even more features into the mix.

One important factor is that EHS is touted as a geographically distributed solution. The service employs several data centers across the globe to provide redundancy and disaster resilience. But the question still remains: Where does EHS fit into a business model?

For small businesses, email is easy to come by. There are several low cost and free options on the market, ranging from Microsoft’s own Office Live service to Google’s Gmail.

On the flip side, Microsoft also sells Small Business Server 2003, which comes bundled with Exchange and many other small office products.

So does EHS make sense for a small business? In most cases, no.

For larger organizations, especially those driven by compliance issues, EHS may be the answer. But considering the monthly cost per user, an in-house solution starts to make more sense, especially since most enterprises have the hardware, software and staffing to deal with the complex issues surrounding email compliance.

That leaves just the midsize businesses as the primary target for EHS. For the midsize market, the question remains: Is a business willing to pay as much as $283 per year per user for full service email? A midsize company with 50 users would have to spend about $14,000 a year on the service. That's a sum that could buy a full service Linux-based email appliance and significant backup capabilities.

With those numbers, it will take significant marketing muscle for Microsoft to make EHS a success.