Microsoft Hosted Exchange Pricing

Hosted Exchange pricing is one of the most compelling arguments used in convincing people to use software as a service, or outsourcing their email services. On the surface it looks like a basic calculation. Setup costs plus running cost versus monthly fee for per seat licensing. It isn’t always that easy though, contrary to what many would have you believe.

The standard calculation is upfront costs vs. monthly ones. For example, for a 5 user mail system the calculation is often illustrated as follows:

• Cost of Exchange server hardware                      $3000
• Small Business Server with 5 Licenses                        $560
• Anti-virus for Small Business Server                     $400
• Backup tape drive                                           $420
• Setup fees                                            $1700
• Annual estimated maintenance cost @$100 month       $1200
• Total cost for first year                                 $7380

The hosted model looks something like this:

• Cost of Exchange server hardware                            $0.00
• Small Business Server with 5 Licenses                        $0.00
• Anti-virus for Small Business Server                     $0.00
• Backup tape drive                                           $0.00
• Setup fees                                            $0.00
• Annual estimated maintenance cost per server           $0.00
• Monthly mailbox cost per user $15×5                   $75
• Annual charge for 5 mailboxes @$15 per month each   $900
• Total cost for first year                                 $975

On the surface hosted Exchange pricing looks to have proved a compelling case. However, these are simplified examples. What it doesn’t take into account is bandwidth, tolerance, SLAs and support.

Many hosted service providers will have a robust support system that offers 24/7 support for issues, but that isn’t a given. Neither is tolerance. To survive long, the service provider needs to utilize server clustering or virtualization to keep downtime to a minimum, but that again, is not a given.

Bandwidth is a big issue, especially as net neutrality is becoming such a hot topic. Hosted Exchange pricing doesn’t take into account the end-users bandwidth costs, which can be considerable unless they rent a fixed pipe. With our email habits often including large files, such as .pdfs or CAD drawings, bandwidth becomes a problem.

In an in-house situation, the only bandwidth problems are the internal network or where the business emails externally with any frequency. These issues can be managed internally. A 10-base-1000 internal network costs relatively little to implement, but buying that kind of bandwidth from an ISP can cost considerably more.

However, to balance that argument, the costs for an in-house Exchange Hosting system is also oversimplified. Servers don’t work in isolation, they need a network, security and availability to be productive. That doesn’t often get factored into a calculation. While it can be argued that most organizations already have a network in place, it isn’t always sufficient to cope with the extra traffic.

Then there is maintenance. Costing it at $100 per month is a very simplistic, and in our opinion generous amount. A server technician costs much more than that, and this calculation is only good in larger businesses where the cost per head is split among many servers.

Hosted Exchange pricing is a complicated process, and one that needs to be undertaken thoroughly in order to get it right. Be wary of these oversimplified pricing illustrations and make your own. It might save you some money.

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2. Intermedia Offers First Hosted Exchange 2010 Service
3. Microsoft slashes the cost of hosted email services; to expand BPOS platform
4. Microsoft Launches Exchange Server 2010 — But Free Competition Looms
5. Microsoft releases Exchange 2010