Why outsource the hosting of company anyway?

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1 When is Hosted Exchange Right for Your Firm? Accellis Technology Group

2 A lot of law firms outsource their Microsoft Exchange Server to a third-party provider instead of purchasing a server and hosting Microsoft Exchange internally. The advantages are that the third-party absorbs the cost of hardware (server), software (Microsoft Exchange), and management (updates, backup, etc.), and leaves the law firm with just a monthly investment of $10-$25 per month per user, depending on who the provider is and how much storage / add-ons you elect to have. For some firms, however, this isn t the most cost-effective route, and there are significant advantages of hosting Exchange internally. What is Microsoft Exchange Server? Microsoft Exchange Server actually isn t an actual server but rather a software application you can purchase to host your own account using a domain name of your choice (you must pay for your domain of course), such instead Here on, we ll simply refer to it as Exchange. You have two options when it comes to Exchange buy the software yourself, put it on your server, and host your mail in-house, or you can pay a third-party to do those things offsite as a monthly service. Why outsource the hosting of company anyway? A lot of upstart law firms start with just one person and no server. Accordingly, in order to get an address instead which lends them much needed credibility, they outsource Exchange hosting to a third-party instead of purchasing the software & server needed to host it internally, which reduces out of pocket costs. As the firm grows the simplicity and scalability of adding $15 per month each time they need a new mailbox is straight forward and low-cost. But, as growth continues, the firm eventually needs to buy a server to run other software that is needed to manage and streamline operations (i.e., practice management software). It s at this point that small firms should start looking at the cost of owning Exchange, as they can combo the use of their server to do both mail and other basic applications. For large firms, a dedicated mail server will be needed, so you can begin looking at any time. What does it cost for outsourced Exchange hosting? For the purposes of my comparison, let s narrow down to one specific provider MailProtector which offers three options to choose from: 1. Advanced 250MB storage $12 per user per month 2. Premium 1GB storage $15 per user per month 3. Exchange unlimited storage $26 per user per month When is Hosted Exchange Right for Your Firm? Page 2

3 What prerequisites are there prior to purchasing Exchange? The prerequisite to purchasing Exchange is purchasing a server you need a box to host this software after all. Servers are about $3,000 on the low-end in hardware costs; setup for the box is usually another $2,000, so you re about $5,000 all in. If you re looking to buy your first server specifically to just bring mail in-house, be prepared to spend more money than if you had just outsourced. If, however, you use this box for other things such as files & legal software, and not solely for mail, then there really isn t any added cost because you both have and need a server anyway; that said, the larger your firm, the more likely that you will need a dedicated server (which adds to your cost) in order to appropriately handle the both the Exchange resource consumption and other resource-consumers like SQL databases. What does it cost to bring Exchange in-house? Here are some of the specific costs associated with bringing Exchange in-house (other than what it costs to buy, install, and manage a dedicated server): 1. Software cost to purchase Exchange: If you are purchasing a new server, just buy a Small Business Server (SBS), which comes with Exchange at an added cost of only $400 which includes five mailboxes; if you own a non-sbs and want to add it to your existing server, think about $700 apples-to-apples. 2. Software costs for backup software agent to ensure Exchange is in the backup scheme: First of all, you need backup software if you own a server anyway, so this isn t an added cost to your firm just because you want to bring Exchange in-house; the added cost is software licensing for the Exchange agent, which is pretty much an extension of the existing software that ensures Exchange is included in your backup scheme. If you own Symantec BackupExec and want to add the Exchange agent, think it ll cost about $500 unless you bundle upfront, which will result in cost savings. 3. IT management & service costs for installing the software and setting it up: Think about paying your tech company or tech guy/gal about $100 per user for setup; this includes installing the software, tying it to the domain name you own, and configuring all the mailboxes & individual / group settings. 4. Monthly IT management & services needed to maintain the account: Assume that you ll need about a half-hour to an hour per month in services from your tech company to manage, maintain, and back up Exchange; so about $50-$100 per month. When is Hosted Exchange Right for Your Firm? Page 3

4 What s riskier for my firm outsourced or internal Exchange hosting? It s not an easy question to answer because there are a large number of variables. 1. Theft: large companies are targeted more frequently by hackers and such because, once penetrated, they have more stuff that can be stolen, giving the hackers better bang-for-thebuck. That said, larger companies have enterprise-grade security, including hardware and software solutions, whereas your small firm might have just software solutions and password passwords. 2. Failures: whoever owns the Exchange software owns the risk associated with hardware and software failure, troubleshooting, and repair; if your provider is down it s costing them, not you, whereas if your mail server is down you re absorbing those costs. Accordingly, if you own Exchange, be proactive instead of reactive and prevent issues instead of reacting to them. 3. Uptime: a hosted solution gives you risk in that if they are down, you are down, and there s no way around this. Sure you can call Ethiopia and talk to The Manager, but you re not getting access to any faster because you told them your hearing is in one hour. You re stuck just like everyone else. Most of these services promise 99% uptime, but, while I admire their enthusiasm, I m still skeptical. That said, it s a two way street; if you don t properly manage and maintain your server and Exchange account, then you ll cause your own downtime and be the person holding the bill once it s fixed. 4. Internet / Power: in a hosted arrangement, if you lose power or Internet, you re down period. Most likely you ll have access to your phone which uses an alternative source of internet (like 3G) but this is hardly ideal, especially for -intensive attorneys. 5. Cloud Conundrum: you still deal with the whole cloud conundrum if you outsource to a thirdparty who owns my s, me or them? Who is liable if s and / or personally identifiable information (PII) are stolen, me or them? Am I violating Bar Association / ethics standards with offsite storage? If Exchange (and all the associated s) are onsite, problem solved. 6. Systems Integrations: owning your own Exchange allows you to integrate it with other legalapplications, such as Time Matters for practice management. This integration is very important for firms looking to stream calendar, to-do, and contact information directly to mobile phones & tablets. A third-party that hosts Exchange in the cloud can t always provide direct integrations with your applications, which are run locally on your desktop or server. Accordingly, if you need integrations between local systems, you ll usually want Exchange to be on your server. When is Hosted Exchange Right for Your Firm? Page 4

5 Can you give me an example for a small law firm? Say we re looking at a 5-user firm who is replacing their server with a SBS machine so they can bring Exchange in-house. The current cost of their hosted Exchange service is $25 per person, per month; this means their total three, four and five year costs are $4,500, $6,000, and $7,500, respectively. The cost for a SBS machine over a Server 2008 machine (one without Exchange) is an extra $400. Then they need the MS Exchange agent for BackupExec, which is the software they use for their backups; it just so happens that when you purchase BackupExec for SBS, you save $400 on the total cost of BackupExec by bundling, so this negates the extra $400 they spent on getting Exchange, putting their total added cost at $0. Say then that they pay their services provider $500 to get each user set up, and then finally assume that each full year of mail server management costs about $600. This means that the five year cost of owning their own Exchange is: ($400) - ($400) + ($500) + ($600)*No. of Years = $X.XX; the three, four and five year costs for bringing Exchange in-house are: $2,300, $2,900 and $3,500, respectively. These are significant savings. What about small firms that don t have a server but want to host Exchange internally? It s more difficult to make the numbers work in this instance because the cost for a dedicated server is about $5,000, meaning the same $2,300, $2,900, and $3,500 figures all go up by $5,000, making hosted Exchange the better value. Thus, if driven solely by cost, the best value for this firm is to maintain their existing outsourced arrangement. What about larger firms? Larger firms will usually need a dedicated mail server in addition to having Exchange and this adds to the total costs of ownership. That said, larger firms have advantages in scale that lower the lifetime costs per person, driving value for the firm. Let s look at a sample cost analysis for a 30 member law firm. Making a few generalizations, I ll calculate the cost of the server, Exchange software, maintenance, and management over five years; this will determine cost per person per month for five years, which we can use to determine when the firm breaks even and starts earning a return on investment. When is Hosted Exchange Right for Your Firm? Page 5

6 Mail Server vs. Outsourced Exchange for 30 Member Law Firm Cost Per Person Per Month Years As you can see the cost per person is cheaper for outsourced Exchange for the first two years; somewhere near the middle of year three, however, this reverses and it s from this point that the longer the firm keeps the mail server the longer they ll enjoy valuable cost savings. The total five year cost for a dedicated mail server for this firm is about $16,000, whereas the total cost for outsourced Exchange for the same five year period is over $23,000. This is a savings of about 45%. Final Thoughts Typically, outsourced Exchange helps smaller firms because the infrastructural and managerial costs associated with hosting this service internally are too much to swallow as a percentage of total revenue. That said, larger firms typically benefit from the opposite because they have a much larger pool of employees (revenue-generators) from which they can evenly distribute costs over a period of years. Generally speaking, the larger the firm (50 members, 100 member, 150 members) the greater the perperson cost savings are; as the number of members decreases the cost per person increases, making this option less & less attractive. Just remember that every single situation (5 users or 500 users) is different and that it might not always be more cost-effective for your firm to bring Exchange in-house just because you have a certain number of employees. We recommend contacting a legal-specific consultant or MSP who can study your environment, go over the numbers with you, and determine if the move can save you money. When is Hosted Exchange Right for Your Firm? Page 6

7 Accellis Technology Group Founded in 2001, Accellis Technology Group is a recognized leader in providing high-impact technology solutions for law firms across the country. We ve built an extensive reputation within the legal industry for providing law firms with professional, knowledgeable and capable resources. With the experience of consulting for hundreds of legal clients, we have an understanding of the 'best-in-practice' solutions that ensure our clients will get the most out of their technology investment. Accellis Technology Group, Inc. Cleveland Pittsburgh Phone: solutions@accellis.com Website: Copyright 2012, Accellis Technology Group. All Rights Reserved. This publication, or any part thereof, may not be reproduced or transmitted in any form or by any means, electronic or otherwise, including photocopying. You may not resell, nor reproduce this whitepaper or the content within for any reason. Unauthorized reproduction or transmission, including any part of this document is a violation of Federal law. When is Hosted Exchange Right for Your Firm? Page 7