Hosted vs. On-Site

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1 S P I C E W O R K S R E S O U R C E P A P E R REPORT Introduction 1 Feature Comparison 2 What About the Risks? 3 Cost 4 Conclusion 6 Introduction T I M E T O R E C O N S I D E R H O S T E D E M A I L Until recently, IT departments had a choice: either go through the effort and expense of setting up an on-site solution, or settle for a third party hosted option that offered little more than POP3, SMTP, and perhaps IMAP services. In the last few years, the game has changed dramatically. A variety of hosted providers have developed very robust offerings that rival and sometimes surpass in-house systems in terms of features, and typically offer uptime, redundancy, and backup features that are prohibitively expensive for most IT departments to provide. With all of these changes in the market, now is a great time for IT departments to reevaluate the decision to keep in-house, and for new companies to consider hosted solutions instead of building out and infrastructure themselves. W H Y N O W? This is a really good time for IT departments to reconsider their in-house systems. Exchange 2010 has been available long enough for IT departments to seriously consider migrating to it. Exchange 2000 s Extended Support is ending at the beginning of For those still on Exchange 2003, the Mainstream Support wrapped up in 2009, and the Extended Support is over in IT departments stuck on older versions of Exchange are faced with migration anyways; migrating to an entirely different system will not be much additional effort as moving to Exchange Alternatively, switching to a hosted Exchange provider should be nearly painless. Published on August 1,

2 Feature Comparison H O S T E D E M A I L H A S G R E A T A D V A N T A G E S Let s take a look at where on-site and hosted solutions differ and where they are similar. Something to keep in mind is that we are comparing in-house, enterprise class software to third party versions of the same. There are certain basics that you should expect from any third party solution (such as backups and redundant servers in different geographic regions); you should not consider any third party provider who does not meet these base criteria. On-Site Hosted Cost Model Typically licensed perserver as well as peruser Per user per month (or per year) Incoming Load All s will be delivered Legitimate s only Redundancy Depends on budget Included Scalability As your needs expand, you need to add additional servers Vendor handles all scalability issues transparently Security Breaches can occur within your LAN depending on attack and architecture Breaches are insulated from your network Maintenance The usual patch cycles, hardware replacement, etc. Vendors transparently handles Feature Set From plain (various POP3/IMAP packages) to full featured (Exchange) From plain (various POP3/IMAP packages) to full featured (Exchange) 2

3 What About the Risks? S E C U R I T Y, P R I V A C Y, A N D Q U A L I T Y C O N C E R N S A lot of companies have had concerns about third party services (not just ). There are risks out there, but the tides (and environment ) have changed significantly in recent years. Quality third party vendors now have much more experience than the typical IT department. For example, an IT department might only experience a critical system failure once every few years, and have little (or no) experience in recovery of systems and data. Most of the time, they will be lucky to have a rarely (if ever) tested recovery plan in place. IT departments are simply too busy keeping the lights on to prepare for disasters. The hosted vendors, on the other hand, are specialists; not only do the have the procedures, they have the experience in dealing with problems. This also applies to security issues such as outside attackers, spam, and malware. Good third party vendors have experienced professionals monitoring systems, specialized security packages, and are constantly tweaking spam and virus filters. Most IT departments do not have the time or budget for anything more than a set it and forget it approach. Indeed, an experienced third party is so good at securing , chances are that even their own people have no access to the contents of your data. In comparison, the usual in-house story is that an insider holds the keys to the kingdom. Another thing that has changed over the years is the overall package of services. Gone are the days where hosted meant 5,000 customer accounts and 20,000 mailboxes on a cheap server with an ugly, limited Web-based control panel. Modern third party hosting offers a variety of enterprise-class solutions, including Microsoft Exchange. Instead of packing as many accounts as possible into one server, they distribute load over data centers to provide redundancy and limit the impact of failures. Likewise, data is stored on top-of-theline storage systems out of the reach of many smaller or cash-strapped IT departments. Online controls systems are much more sophisticated than they used to be as well. A big concern for many companies is regulatory compliance. It is common for IT departments to assume that regulations require them to keep everything inhouse, or that ensuring regulatory compliance with a third party is more hassle than it is worth. The better hosted providers have worked hard to understand and comply with major regulations. And in many cases, they can act as a partner to keep you on safe ground because they have the knowledge of the regulatory environment that an IT department might have to spend a lot of time and effort getting familiar with. Depending on the regulations that your company is subject too, you may indeed be able to use a service provider so long as they meet certain requirements. You will want to check with the vendors that you are considering to see what experience they have with the regulations in your industry. 3

4 Cost to Host C O M P A R I N G H O S T E D S O L U T I O N S Most companies put price as the most important or second most important factor in many decisions. There is a wide gap in pricing between different hosted providers, as you can see on the chart. Of course, price does not tell the whole story. Each vendor has a unique combination of value-added services and features to take into consideration. Each of these vendor prices are for hosted Microsoft Exchange, other than the POP3/IMAP service from Rackspace year 3 years 1 year 3 years 1 year 3 years Microsoft BPOS $3,000 $9,000 $6,000 $18,000 $14,430 $43,290 AppRiver $7,770 $23,210 $15,540 $46,620 $38,850 $116,550 Intermedia $5,720 $16,280 $11,310 $32,190 $28,620 $82,380 Rackspace (POP3/IMAP) * $600 $1,800 $1,200 $3,600 $3,000 $9,000 Rackspace * $4,800 $14,400 $9,600 $28,800 $24,000 $72,000 *Rackspace prices reflect a special discount for the Spiceworks community, use discount code when ordering. Cost vs.. In House IN- H O U S E V S.. H O S T E D On the surface, in house solution may seem less expensive than hosted solutions. These analyses are usually are not apples to apples, as many compare just in house Exchange server and per user licenses to hosted solutions. For an accurate comparison, a fully supported in house solution must be compared to a hosted solution to get a fair gauge. Once your fully burden an in house solution, hosted seems like a much more logical choice. 4

5 As an example, the following comparison is for 100 total boxes, with 80 of them being Exchange and 20 being POP3/IMAP. In this example hosted is $14,000 cheaper than on site in the first year, and $24,000 less expensive over 3 years (the savings are $5,000 and $15,000 respectively assuming you need no new hardware or software licenses). As you can see, what looks like a significant cost savings with an in-house solution based on software costs alone becomes a very high cost once you factor in the other additional costs that you pay for with an in-house system, but are already included as part of the hosted package. Exchange Year 1 Year 2 Year 3 Total Upfront Costs (hardware, backups, software licenses) Antispam and Antivirus Utilities, Bandwidth, Facilities, etc. Employee Costs $9,000 $0 $0 $9000 $1,500 $1,500 $1,500 $4,500 $1,500 $1,500 $1,500 $4,500 $10,000 $10,000 $10,000 $30,000 Total $22,000 $13,000 $13,000 $48,000 Rackspace * Year 1 Year 2 Year 3 Total POP3/IMAP $240 $240 $240 $720 Exchange $7,680 $7,680 $7,680 $23,040 Total $7,920 $7,920 $7,920 $23,760 *Rackspace prices include a special discount for the Spiceworks community, use discount code when ordering. 5

6 These calculations were performed with the free Spiceworks online server cost calculator ( Give the calculator a try for yourself to tweak the formula for your own scenario! Be sure to expand the dropdowns for the cost breakout to customize the calculation to your needs. Conclusion I T M A Y W E L L B E W O R T H A S W I T C H Hosted solutions clearly carry a lot of advantages. They can take a ton of weight off of your shoulders and reduce your headaches dramatically. By making the move, you can cut your hardware needs, reduce the impact of on your bandwidth, allow your IT staff to focus on larger issues, and get a more specialized team handling your infrastructure. At the same time, the ongoing, per user costs can be a bit intimidating compared to various open source options or the perpetual license model of traditional solutions. Cost comparisons will need to be customized to your environment, and try to encompass as much of the total cost of ownership as possible, which is where hosted solutions frequently end up being less expensive than in-house options. The traditional risks associated with hosted are in the past, and now is a great time to evaluate your choices. Copyright Notice Spiceworks Inc Mountain Ridge Dr. Suite 100 Austin, TX Tel: Fax: Website: marketresearch@spiceworks.com The contents in this report are a result of primary research performed by Spiceworks. Unless otherwise noted, the entire contents distributed as part of this report are copyrighted by Spiceworks. As such any information made available by any means in this report may not be copied, reproduced, duplicated, published, displayed, transmitted, distributed, given, sold, traded, resold, marketed, offered for sale, modified to create derivative works or otherwise exploited for valuable consideration without prior written consent by Spiceworks. This report contains information of fact relating to parties other than Spiceworks. Although the information have been obtained from, and are based on sources that Spiceworks believes to be reliable, Spiceworks does not guarantee the accuracy, and any such information might be incomplete or condensed. Any estimates included in this report constitute Spiceworks judgment as of the date of compilation, and are subject to change without notice. This report is for information purposes only. All responsibility for any interpretations or actions based on the information or commentary contained within this report lie solely with the recipient. All rights reserved