Migrate from SBS2003 to Server 2012r2 with Exchange 2013

I have a client with 10 users currently running SBS2003 and use Exchange 2003, but not sharepoint or SQL Server.  We are preparing to move to Server 2012 Standard R2 and Exchange 2013.  I know I cannot migrate from Exchange 2003 to Exchange 2013 easily, so I think I have 2 options.  Option 1 would be to bring the Server 2012 r2 online as part of the current domain, move the data files over from the old server to the new server.  Then export the 10 mailboxes out to PST files.  Shutdown SBS2003, install Exchange 2013 on the new server and import the PST files back into Exchange 2013.  Option 2 is to just build a new domain on the new box, create the users, install Exchange 2013 and make sure that all works, then export the Exchange 2003 mailboxes to PST files, connect the workstations to the new domain and import the PST files back into Exchange 2013.  I have three questions: 1 - Which is the better option; 2 - What are the steps for the best option; 3 - while MS does not recommend it, is it possible to run Exchange 2013 on the same box and what are the drawbacks of doing that?
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Neil PreeperCommented:
This should not be a big network. just copy the data and pst files on another drive. disjoin the computers from the SBS domain and start from scratch with the new server.

import the PST files in each mailbox into new server along with the data and then join the computer to this new domain network.

keep in mind that this will not transfer the local profiles from the client pc into the new domain.  IF there was any wrong wit the old way, now the time to clean up and start from fresh.
Adam FarageEnterprise ArchCommented:
Shutdown SBS2003

Its not that easy... you would have to remove / uninstall Exchange 2003 as it will still show in the schema, and when you attempt to do the schema prepare / active directory prepare for Exchange 2013 it will see Exchange 2003 thus blocking the actual schema prepare / ad prepare.

I say go with Option #2, keeping what I just said in mind. You can use ExMerge to get all the information out, and then the bulk PST import these into the associated mailboxes.
Cris HannaCommented:
First of all, your new Server 2012r2 will have to be a domain controller, since the SBS box is going away.  From a best practice from Microsoft, Exchange should not be installed on a domain controller, so you'll need a second Server 2012r2.  Not to mention CALs for both Windows Servers and CALs for Exchange...starting to get a bit pricey for 10 users, isn't it?   Just bring in one new server, make it a Domain Controller in the SBS domain and migrate email to Office 365
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pwayteAuthor Commented:
Thank you all for your comments.  I agree that Option 2 may be my best bet, except that would put Exchange on the same server as the domain controller.  I understand that MS Best Practice says not to do that, but am wondering; given the small number of users, can it be done anyway?  I have already purchased Exchange 2013 and licenses, so that cost is already absorbed, but adding another server would increase that considerably.  I like the idea of using Office 365 and am willing to eat the cost of Exchange, but with Exchange, the ISP just sends email to the Exchange server; how does that work with Office 365?  Do I have to have a mailbox for each user at the ISP instead of onsite?  Again, thank all of you for comments.  Will spread the points after these questions answered.
Cris HannaCommented:
With office 365, the email for each user goes directly to Microsoft servers, your ISP is completely out of the loop for email.  There are security as well as performance risks having Exchange on the domain controller.  How much ram in the new server?
pwayteAuthor Commented:
I have 32 GB RAM on new server.  I am still confused by Office 365.  So I currently have an exchange server and the ISP sends all mail for yyy.com to our exchange server and the exchange server routes it to xxx@yyy.com.  How does the user retain the xxx@yyy.com email address when the mail is routed to Microsoft servers?  Do the keep the same email address of xxx@yyy.com or something else?  Changing the domain of yyy.com will not work for my clients.
Cris HannaCommented:
you keep the same domain name...
Are you familiar with DNS records and more specifically MX records?   So lets use your example of domain yyy.com  
typically you would have Host (also known as an "A" record) DNS record wherever your public DNS records are hosted (might be your ISP).   That Host record might be something like "mail".yyy.com which points to a static Public IP address.   When you have an exchange server, as in the case of SBS, that A record should point to the public IP address you have for your SBS box.   Then your mx record points to mail.yyy.com.    So if you moved to office 365, you would simply change the MX record for yyy.com to point to Microsoft's mail servers for Office365.   They would provide that information.

You could do what your proposing with everything on premises, by going Virtual.   one hardware box with Windows Server Core installed and then add the Hyper V role.  Then install a virtual instance of Server 2012r2 to be your Domain Controller, DHCP Server, DNS Server, Holder of the FSMO roles, etc    Then install a second virtual instance of Server 2012r2 as a member server and install Exchange on there.   Then you've met your goal of keeping everything local, following best practice and don't need new hardware.   Allocate 8GB of RAM for the first server and 16 for the Exchange Server.  That leaves 8GB for hyper V host.

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pwayteAuthor Commented:
Cris - I have awarded your response the points - thank you.  I have been playing around on a test server and working with the Hyper-V to make sure it will work.  I have a follow-up question to your response.  How do I install the Virtual Instance of Server 2012 from the Server Core?  I see lots of help using the GUI to do this, but not in Core using PowerShell.  PS is quite robust, but is a bit cumbersome compared to using the GUI.  From what I have read, the GUI only takes 4GB of more disk space of which I have plenty.  Is there another reason to use the Core vs the GUI.  Thanks again for the help.
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