Exchange Losing Ground to Gmail in SMB

Updated Feb 20 4.25pm PST to correct and clarify user storage quotas.
Updated Feb 21 2.30am PST to clarify that Microsoft claims that these quotas have changed.
Updated Feb 21 6.45am PST to add "mixed messages" comment.
Updated Feb 24 11.15am PST to add link to service description
Updated Feb 24 12.05pm PST to add maximum cap.

There is a groundswell of customers in the sub-100 seat range who are unhappy with the cost and effort of supporting Microsoft Exchange for their organizations. The cause of dissatisfaction tends to be around (1) licensing costs, and (2) the effort and cost of managing multiple Exchange and Active Directory servers (or Small Business Server) for a small organization.

These customers face several options. When it comes to the Microsoft vs. Google battle, these options boil down to:

  • Migrate to Google Apps Premium accounts for approx. $50/user/year for 25GB of storage per mailbox
  • Migrate to Exchange Online for just over $100/user/year for either 2 or 5GB of storage per mailbox, depending on whom you talk to [A Microsoft spokesperson claims that storage allocation across an organization may average 5GB per user -- up to 10GB for a few heavy users, as allocated by IT -- but all the documentation we can find still states the 2GB figure. Microsoft is sending mixed messages at best.]
  • Migrate to Exchange Online for just over $100/user/year for 5GB of storage per mailbox (storage allocation across an organization may average up to 5GB per user out of a per-organization storage pool -- so caps can be lifted up to a maximum mailbox size of 10GB for a few heavy users, as long as the average limit isn't exceeded). Microsoft is obviously racing to catch up to Google’s 25GB quotas here.

The choice seems clear: Customers get an order of magnitude more storage at half the cost. This, then, leaves customers facing a feature decision between Outlook, Gmail, and IMAP clients. When this doesn’t become a "religious" decision (like Mac vs. PC), it comes down to the following key features:

  • Folders in Outlook vs. tagging in Google
  • Offline capabilities (now dampened by Google's Gears capabilities)
  • Search capabilities

At the end of the day, companies that either like the Gmail user interface -- or can bring themselves to like it -- will most likely make the switch. We predict that unless Microsoft dramatically increases Exchange Online mailbox quotas and decreases its pricing, a significant segment of the sub-100 user market will make the move in 2009. Economic conditions will only accelerate this migration away from the costs of running Exchange in-house.

... David Sengupta

One Comment

  1. Larry Seltzer
    Posted February 18, 2009 at 5:33 PM | Permalink

    I haven’t used Google Apps Premium, but does the calendar really compare to Outlook/Exchange’s? I’d be surprised if it does.

    And you don’t address support. From what I can see online, Exchange Online is much more liberal about phone support.

  2. Posted February 18, 2009 at 5:51 PM | Permalink

    Yes, pretty similar. And it synchronizes with Outlook, if you want to continue using that client. It also now supports ActiveSync, so it syncs with Windows Mobile and iPhones.

    Don’t have experience of Google Apps support — never needed to call it.

  3. Posted February 18, 2009 at 6:28 PM | Permalink

    What’s about other vendors? Both On- and Off-Premise:
    – OpenExchange
    – Lotus Foundations
    – LotusLive
    – Telco/ISP based solutions
    … just to name a few.

  4. Posted February 18, 2009 at 6:32 PM | Permalink

    Stephan, we remain to be convinced that any of these have significant traction.

  5. David Hoff
    Posted February 19, 2009 at 2:39 PM | Permalink

    +1 to Richi – most users that we move to Google Apps remark that the Google Calendar is actually better than Outlook; it is much easier to manage multiple calendars and work with teams. The majority of our larger enterprise roll-outs start with just the calendar. Users love it!

  6. Ken Hughes
    Posted February 25, 2009 at 3:27 PM | Permalink

    I wonder how (or if) peoples perceptions will change after Google Apps being offline for hours yesterday (hot on the heels of Google blacklisting the whole internet last month)

  7. Posted March 3, 2009 at 2:52 PM | Permalink

    Most SMB customers are accustomed to much more downtime and reliability problems when running their own infrastructure. On average Google’s up-time has been outstanding. In fact, anytime Google blinks, they entire world publicizes it.

    Most sub-500 employee companies can’t justify or afford having a clustered infrastructure; few if any in this size range have redundant data centers.

  8. Posted March 5, 2009 at 9:53 PM | Permalink

    The SMB market is not a single market, but rather a fragmented set of several markets.

    We have acquired 900,000 SMB customers, and more than 3.1 Million users in this space by delivering an alternative to Outlook/Exchange, while delivering a more familiar user experience than Gmail.

    David Koretz
    President & CEO

  9. Posted March 30, 2009 at 9:07 AM | Permalink

    Hi there, Ben Duncan here from Atmail.

    Over the years we have seen a growing number of clients migrating to our Linux Atmail platform from Exchange. Gmail still seems to be on the top list for companies wanting to outsource mail, however on-premises control of email still seems a top priority for SMB’s in our experience.

    Ben Duncan
    Atmail Founder

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