Microsoft’s Hosted Exchange Should Do Well (2005)

Today, January 10, Microsoft announced Microsoft Solution for Hosted Messaging and Collaboration. This is software sold to service providers, so that they in turn can offer a hosted solution to small and medium sized businesses.

The components are:

• Exchange Server 2003, providing, mainly, email and group scheduling. Outlook users get full MAPI capabilities--in other words, nothing or almost nothing is grayed out
• Live Communications Server 2005, providing, mainly, instant messaging and presence
• Windows SharePoint Services, providing a team workspace capability. For a recent assessment, see our cautionary report on the product

Everything runs on Windows 2003. Extra facilities are provided that service providers need, notably centralized management, service provisioning, and plenty of monitoring and reporting.

In the past, many firms--United Messaging, for instance--have had hosted Exchange offerings. However, they all failed to build a substantial business. Major reasons were:

• Exchange is too chatty when talking to Outlook. So users saw poor response times
• Low latency, high speed lines were often unavailable, or too expensive

With Exchange 2003, Microsoft did much to reduce the chattiness, and improve the level of interactivity with remote communications. And of course the price/performance of lines is improving everywhere. So the technical hurdles are gradually being overcome.

There are many organizations with just 20, 50, or 100 users using Exchange. The internal support efforts make this an expensive way to provide email. And anyway, small firms like these have only very limited support resources, and it's hard for them to make the IT resources available. There are thus very strong arguments for small organizations to outsource their Exchange systems. The arguments extend to many medium size organizations, too.

If Microsoft does a reasonably good job of implementing the software, this offering should do well. Don't take it for granted that the code will be good enough: Microsoft's last attempt with hosted email software wasn't, and failed.