RealTime IT News

Microsoft Exchange Joins the Cloud

Microsoft finally unveiled Microsoft Exchange Hosted Services (EHS) today, giving the market a better look at the types of hosted services and prices it intends to offer going forward.

EHS is also making good on Microsoft's promise to enter the software as a service (SaaS) market.

A Microsoft spokesperson told internetnews.com that EHS is, "a key offering in Microsoft's software as a service strategy."

After acquiring managed messaging services company FrontBridge Technologies in August of last year, Microsoft was eager to stamp the service with its own brand and jump into what it sees as a huge market opportunity.

Aimed primarily at the SMB market, Microsoft entry is a recognition it's been leaving money on the table -- something it is loathe to do in any market segment.

The Microsoft spokesperson said the company is simply responding to customer demand.

"Regardless of size, customers are shifting toward a services approach, whether it's service-oriented architecture, on-demand delivery through virtualization, or services running out in the cloud."

In particular, Microsoft has seen that there is an enormous market for hosted email tools such as disaster recovery, email hygiene, and compliance.

These tools "are ways they can monetize a lucrative business," noted Matthew Cain, an analyst with Gartner. EHS should be particularly attractive to small and medium sized businesses, added Cain.

His back-of-the-envelope calculation shows that a hosted version of virus protection will be no more expensive than an on-premises solution. Moreover, since 90% of all in-bound SMTP traffic is now spam, the ability to block those emails from even reaching a company's network is a very attractive proposition.

"Most IT organizations would rather have their staff focused on more value-added activities than chasing spam and viruses," he noted.

No surprise, then, that the announcement highlights hosted solutions for spam filtering, full-text archiving for compliance purposes, security enhancements to protect against unplanned outages of on-premise environments, and encryption for purposes of email confidentiality.

Analysts believe there is a powerful incentive for Microsoft to enter this space, even if it comes at the expense of their own third party partners.

"Microsoft is trying to monetize areas they do not currently monetize," Cain told internetnews.com.

Other analysts were less kind, chiding Microsoft for competing with their own partners.

"Do you do things to enable your partners, or do you do things to compete with them? Microsoft's approach is to do the latter," noted Joe Wilcox, an analyst who follows Microsoft for Jupiter Research.

The Microsoft spokesperson, however, denied that the company is doing anything to hurt its partners, and stressed that EHS is all about the customers.

"The multiple software delivery models are a way for Microsoft to get more of our valuable technology in a customer's hands in the manner they choose and in the timeframe they want," the spokesperson said.

Managed services provider Postini had a positive spin on Microsoft's entry. “Microsoft only enters proven, growing market segments,” said Andrew Lochart, senior director of marketing at Postini in a statement. "This should put to rest any lingering resistance by customers to managed security services."

Microsoft said that customers could also choose whether to obtain a hosted solution directly through Microsoft itself, or through its traditional volume licensing channels.

Wilcox also agreed that Microsoft has a compelling customer-service reason to offer a hosted Exchange solution. Attacks are increasing against businesses and consumers, both of which are Microsoft customer segments, and Wilcox thinks the Redmond, Washington-based company couldn't afford to allow its image to be tarnished.

"There's no question that Microsoft needed to do something," said Wilcox.

Microsoft also announced a new pricing structure. For a small business with as few as 5 users, Microsoft said entry pricing would be as follows:

Microsoft Exchange Hosted Filtering would be $1.75 per user per month;

Microsoft Exchange Hosted Encryption would be $1.90 per user per month;

Microsoft Exchange Hosted Continuity would be $2.50 per user per month; and

Microsoft Exchange Hosted Archive would be $17.25 per user per month.

Further down the road, Microsoft said it expects to integrate EHS with key features of Exchange 12, including support for calendar and contacts.