In house Exchange 2010 or Hosted Email solution?

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I've been asked to investigate the pros and cons of an exchange 2010 upgrade.  We're currently running exchange 2003 in house for around 100 users with a surf cotnrol email filter on the front end along with a BES for our Blackberry users.  We have an experienced IT staff who could perform the upgrade and manage the email server but at the same time the industry seems to be trending hard towards hosted solutions for communications.

I'm looking for feedback from others in the same situation.  Is it still cost effective to host an exchange server in house?  Does it make more sense for a SMB to go with a hosted email soluition?  Let me know your thoughts and please let me know if there is any further info I could provide that would help make a decision.
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James HIT Director

Commented:
Pros: Less overhead and management of Exchange and BES
         No Licensing costs
         Offsite backup
         24x7 support with Email host

Cons: Lack of customization - control
          Cost - very expensive, about $10.95 / box per month
          Slow transition to transfer data to their servers

I would prefer in house over hosted as I have control over the server and how you want to tweak it.
I worked for years at a premium Exchange outsourcing vendor.  Here are some things to consider, before even contemplating outsourcing:
1. Complexity.  What kind of applications do you have that integrate with mail?  Are there any in your roadmap?  How important are they to you?
2. Data residency.  Is your business OK with data being stored across borders?
3. Are you looking to experience quick growth or quick shrinkage?

After you determine if outsourcing is even a valid option based on the above questions (ie: if you have CRM systems deeply integrated with mail, it may not be the best option), it's time to look at vendors.

Vendors in the email space can be generally broken down into two categories.  The "Vanilla" providers and the "Premium" providers.  Vanilla providers are vendors like Gmail, Microsoft BPOS etc.  They provide a mail product, and you can use it.  There is no such thing as customization, special requests, helpdesk integration, support for your end users etc.  They are the cheapest by far.  These are almost never the right decision for a medium to large business.  The sweet spot for these companies is typically in the 10-100 user range.  Even as high as a couple of hundred, but then you start seeing companies that require more complex options.

Premium vendors are vendors that have expert staff.  They architect and configure enterprise level messaging environments.  They can help you with a lot of your complex requirements (not all).  They have additional options for support.  Helpdesk integration, premium support for all your users, etc.  These companies aren't going to provide the same level of savings as the vanilla vendors, but you will still likely see relatively significant savings over time.  You won't have all the flexibility you used to have, but there's a good change they can do most or all of the things you need.

Anyway, I hope this helped.
Lee W, MVPTechnology and Business Process Advisor
Most Valuable Expert 2013
Commented:
You have to do a cost-benefit analysis.  Look at the providers you might use, and forecast costs for 1, 3, 5 years out.  If it's $10/user/month, thats $120/user/year x 100 users or $12000 per year.

Buying Exchange and the Exchange CALs and the Exchange Server and Windows Server licenses could cost the same in the first year.   Maybe more.  But what about over 3 years?  Those first year costs for in-house are usually the most expensive.  Second year could be $1/5 the cost... or less.  You do have to factor in other costs though - like the "man-hours" for setup of both, the costs for ongoing maintenance (time), the cost of backup... but this is why you make Excel your friend and start filling in the blanks.  

(And I don't think the trend is to the cloud - I think MS and cloud providers want you to believe that.... and there are instances where it can make sense... but I don't think it's the end-all-be-all of computing the way many of the big players seem to want you to believe.  Let there be one MAJOR cloud problem (A hacker gets in to the cloud systems for example) and things could shift QUICKLY).

Neil RussellTechnical Development Lead

Commented:
Your internet connectivity reliability and speed should also be a factor. What happens when you lose connectivity? What happens when 20 people open outlook and download all their emails everymorning with attatchments etc.

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Commented:
Thanks all, great info

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