November 15th, 2008

How much does Exchange really cost?

Posted by Phil Wainewright @ 5:14 am

Categories: Collaboration, Google, IT outsourcing

Tags: Serena Software Inc., E-mail, Cloud Computing, E-mail Servers, Online Communications, Enterprise Software, Software, Phil Wainewright, Cost, Exchange

A heated discussion is raging in the comments to a Clint Boulton eWeek article about Serena Software’s decision to switch from Microsoft Exchange to Google Apps.

What is at issue is the true cost of running Exchange. Serena says that junking Exchange in favor of Google Apps will slash its costs from $1 million a year down to $250,000. Many of the commenters are wondering how an 800-employee company manages to blow an eight-figure sum on running its email servers, and the debate throws an intriguing light on how people evaluate the relative costs of on-premise software against in-the-cloud alternatives. Here’s one of the commenter’s calculations:

“800 CALs at retail pricing is $67 x 800 = $53,600. Exchange Enterprise Edition is $3,999. Let’s assume they have two servers: $7,998. Let’s also throw in the Software Assurance CAL of $35 x 800 = $28K. Two beefy servers at $10K each = $20K. Two full time Exchange administrators at $100K/year = $200K. Total = $309,598/year.”

Serena’s VP of corporate communications responded, explaining that ancillary costs such as spam filtering, security, archiving and disaster recovery (DR) accounted for much of the total cost:

“Here is how we factored our costs, basic Exchange costs (CALs, SAs and the like) paired with Postini is around $500k. That’s not our full costs though … where the costs really start adding up is in storage and disaster recovery (particularly when you consider we have DR plans for 18 countries). So when you take unified messaging, storage, DR and admin costs which come to $500k and add the original $500k we were looking at $1 million USD per year as a total.”

That hasn’t cooled the debate, with several Exchange hosters weighing in to say they can provide an equivalent raft of services for a much lower all-in cost. But the discussion does underline how easy it is to underestimate the cost Read the rest of this entry »

April 21st, 2008

Microsoft should do this: Exchange plus Hotmail

Posted by Phil Wainewright @ 4:30 am

Categories: Collaboration, IT outsourcing, Microsoft

Tags: MSN Hotmail, Microsoft Corp., Service, Exchange, Mailtrust, Prices, E-mail Providers, E-mail, Internet, Online Communications

One of the reasons cited (by Cap Gemini, for example) for investigating Google Apps for Enterprise as an alternative to Microsoft Office is the cost of rolling out Exchange email to every worker in an organization. Employees who only need email accounts occasionally, for example to correspond with the HR department, don’t justify the overhead of an Exchange account, so a low-cost webmail service is an attractive option (though not if it stops working).

This is a competitive threat that Microsoft could neutralize straight away if it offered enterprises a way to provision and manage accounts on its Hotmail service as part of an enterprise Exchange implementation. Of course the corporate version would have to lose some of the more consumer-y aspects of Hotmail, but that’s very easy to do. I’m surprised it’s never discussed, especially since it’s the kind of bold move that would put some much-needed oomph into Microsoft’s flagging ’software-plus-services’ strategy.

Instead, it’s been left to one of the myriad small providers of hosted Exchange and webmail to put such a solution together — Exchange plus a low-cost webmail service, managed from a single administration console. The service launches this morning from Mailtrust, which was known as Webmail.us until a name change following its acquisition last September by hosting provider Rackspace [disclosure: Rackspace recently comped me an account on its Mosso cloud hosting service, although I haven't yet had a chance to set aside time to start using the service].

Unlike many hosted email providers, Mailtrust specializes in catering to businesses rather than individuals, and all of the 800,000+ mailboxes it hosts are paid for. Of that total, 40,000 are hosted on Exchange at a starting price of $14.95 per user per month, while the reminder are hosted on Noteworthy, the provider’s own homegrown business webmail service, with a starting price of $3 per user per month (and a minimum 10 users per account). Prices are discounted for larger numbers of users.

The integrated control panel is scheduled to be available from today for new customers, and will be Read the rest of this entry »

September 12th, 2007

Google and Capgemini just doesn't add up

Posted by Phil Wainewright @ 5:21 am

Categories: Ecosystems, Google, IT outsourcing

Tags: Google Inc., Google Apps, Capgemini, Phil Wainewright

I suspect a lot of the buzz generated by Google’s initiative to deliver online applications to the enterprise stems from a gut feel that software, along with all the IT infrastructure and professional services that surround it, simply costs too much.

So when Capgemini comes along and says it’s going to support Google Apps Premier Edition (GAPE) as part of its desktop outsourcing play, it simply doesn’t add up. Google Apps is part of a fresh, new wave that’s going to blow away all those high-cost, consulting-laden IT rollouts. Isn’t it?

Except that … enterprises don’t understand this web-based SaaS model. There’s no established best practice for buying it, implementing it, governing and managing it. Capgemini brings respectability, packages it into a model that enterprises can deal with. In doing so, GAPE becomes a little more mainstream, a little less threatening.

Trouble is, if you’re the kind of enterprise that wants mainstream and unthreatening, then you’re going to stick with Microsoft, thank you very much. And if you’re the kind of business manager that’s deploying GAPE to escape the oppressive confines of the enterprise IT infrastructure, then the last thing you want is to have it all smothered in consultant goo.

So I don’t think GAPE’s buyers are going to go for the Capgemini proposition. And I don’t think Capgemini’s customers are going to buy GAPE. But even if it changes nothing, both vendors get to look good from doing the announcement, so everyone’s happy.

October 20th, 2006

Can Accenture learn to love SaaS?

Posted by Phil Wainewright @ 12:33 pm

Categories: Ecosystems, IT outsourcing, RightNow, Salesforce.com

Tags:

Accenture and its competitors — both those based in US/Europe and the up-and-coming Indian IT services and outsourcing firms — are starting to take an interest in on-demand services. Even though they must be worried about the potential impact on their established business models, they can see on-demand revenues growing and more and more enterprises giving it a go. But what sort of engagements are they looking for? What will it take to bring them to love SaaS the way they currently love SAP, Siebel and the rest?

Chief strategy officer Bob Suh was on stage at Dreamforce two weeks ago to give Accenture's blessing to Salesforce.com and its AppExchange/Apex announcements (the picture of Bob is from his appearance earlier this year at AlwaysOn Stanford Summit). He delivered some interesting advice on how to be successful with business application projects in the enterprise. I don't have his exact words in my notes, but here's the gist of his four points:

1. Execute swiftly
2. Downplay permanence (people tend to overplan a project if they see it as something for the long-term)
3. Take advantage of the medium (don't just automate existing processes, get some extra leverage)
4. Think of the immediate need

I think on-demand vendors more or less take the first and last points for granted. The point about downplaying permanence is an interesting one, and I'm sure every systems integrator has plenty of stories about projects that ran off the rails because customers got so nervous about the scale and scope of what they were implementing. Point three recalls Read the rest of this entry »

September 26th, 2006

Liveblogging SaaScon: CIO skepticism

Posted by Phil Wainewright @ 10:15 am

Categories: Business applications, IT outsourcing

Tags:

I was surprised yesterday in conversation with Bob Jurowski, CEO of on-demand accounting provider Intacct, to learn that his company is finding there are some CIOs who are now standardizing on the on-demand or SaaS model for delivery of their IT. "If you look at the world as a portfolio of shared services, it gives the CIO a much more flexible set of options to work with," he explained. "Once you have a taste of the [on-demand] experience and the benefits, I think it’s very difficult to go back to the old way of doing things."

In fact, Tom Berquist, CFO of database vendor Ingres, is writing about the experience of moving to SaaS on his blog:

"In order to get our business up and running in a hurry and enable our global employee base (five offices in Europe and Asia and three in the US) to access the same information without a lot of expense we decided to go On-Demand for our enterprise applications … We hope to be live with the solution in September and I will update you on what we learn."

So today at SaaScon there’s a panel discussion entitledThese CIOs agree that most of the claims vendors make for SaaS are outlandish ‘The Skeptical CIO’. Naturally these CIOs are not total skeptics about SaaS per se, otherwise they wouldn’t have bothered coming to take part in this conference. But as the session moderator Maryfran Johnson mentioned in her introduction, any CIO who wants to do a good job these days has to maintain a healthy degree of skepticism — especially when it comes to what they hear from vendors.

Listening to this session is instructive, because what customers say is always so much more grounded Read the rest of this entry »

September 11th, 2006

Hosted Exchange is alive and well

Posted by Phil Wainewright @ 9:43 am

Categories: Collaboration, IT outsourcing

Tags:

Two long-established stalwarts of what was once known as the application service provider (ASP) industry joined forces today with the acquisition of Mi8 by Apptix. Those with long memories may remember Apptix better as the infrastructure software division of ASP pioneer Telecomputing, which span out from its parent in a demerger in 2002. Telecomputing, by the way, continues to thrive in its native Scandinavia.

Some interesting bits of information from the release announcing the acquisition today:

"Mi8 was profitable in the first half of 2006, generating $4.87 million in top line revenue and $4.61 million in recurring revenue during the period. During 2005, the company generated $6.45 million in top line revenue and $5.42 million in recurring revenue. The company presently has approximately 1,750 customers and 40,000 end users of Exchange. At the end of the second quarter, approximately 67% of users were from customers with more than 50 users."

"The combined entity will be a dominant market leader for Hosted Exchange with over 130,000 subscribers … Increasing Apptix’s pro forma top line revenue and monthly recurring revenue for the first half of 2006 to approximately $12.68 million and $12.03 million respectively, an increase of approximately 62.4% and 62.2% respectively."

The price tag for Mi8 was $21 million in cash. Apptix says that the acquisition makes it "the dominant leader in the delivery of on-demand messaging and collaboration solutions for the SMB market."

Regular readers may recall that Mi8’s president Patrick Fetterman contributed some spirited commentary on attitudes to email outsourcing back in February, when we discussed the true cost of running email in-house.

August 17th, 2006

Why business is driving SaaS adoption

Posted by Phil Wainewright @ 4:21 pm

Categories: IT outsourcing

Tags:

I recorded a podcast earlier this week. It’s now live here:

Phil Wainewright on why business is driving SaaS adoption

In it, I discuss a topic that’s attracted a lot of comment on this blog over the past week: The love-hate relationship between IT shops and SaaS. Paul Gillin, the podcast host, picked out this statement of mine as the standfirst for the recording:

"Business people love SaaS software, on-demand software. IT people kind of hate it, but would probably like it better if they understood it better."

The podcast is part of a series interviewing speakers at the forthcoming SaaScon conference next month in San Francisco (disclosure: I’m on the advisory board of SaaScon but have no commercial interest in the conference. The organizers are contributing some of my travel and accommodation expenses).

Apart from being a live demonstration of why I’m more comfortable blogging than being interviewed, the podcast picks up several themes about IT and SaaS. For example, the usual excuses you’ll hear from IT to avoid examining SaaS fairly:

"It’s very convenient to pick up things like security and data ownership, but these are red herrings."

I then go on to talk about why the combined momentum of SOA, Web 2.0 and SaaS is putting a services mentality at the heart of IT, and IT people will just have to overcome their lack of confidence in handling these things:

"If you want to stay on top of it then you’re going to have to embrace it, because it’s an unstoppable tide."

We finish with some discussion of the application categories where SaaS is making big strides, along with the extent to which enterprise software vendors are challenged by the SaaS model.

August 9th, 2006

IT shops 'afraid of SaaS'

Posted by Phil Wainewright @ 12:42 pm

Categories: Content management, IT outsourcing

Tags:

Two thirds of companies are missing out on the potential advantages of a SaaS solution simply because the IT department are scared of trying SaaS, claims Jim Howard, CEO of website content management vendor Crownpeak.

"There are these persistent myths that are eliminating SaaS companies from projects before we’ve even been spoken to," he says. "Part of the reason is, it’s not the way they’ve done it before."

Last week, Crownpeak launched a program of media and analyst briefings in an attempt to counteract what the company sees as a litany of "myths and misconceptions propagated about software-as-a-service."

I spoke to Howard yesterday. He told me that even when vendors like Crownpeak get an opportunity make a pitch, deals are still lost because IT organizations start coming up with objections on the grounds of security, platform, control or some other alleged shortcoming. "Whatever these objections are, they’re really mythical objections. But the fears are real," he said.

Crownpeak is one of the largest and most successful on-demand vendors in the web content management market. Although the penetration of on-demand solutions in Crownpeak’s sector is running at around a 20% level, it’s not yet recognized as a mainstream option in the way that it is in other sectors like CRM and web analytics. That’s mainly because Read the rest of this entry »

June 8th, 2006

OneCare Live and the battle for the desktop

Posted by Phil Wainewright @ 4:04 am

Categories: IT outsourcing, Microsoft, Rich Internet Applications, Security

Tags:

Even though George Ou is right that anti-virus software doesn’t belong on the desktop, there are strategic reasons why Microsoft wants you to keep it there. I set these out in my Febuary posting, OneCare Live secures the desktop for Microsoft:

"As we’ve already seen from the emergence of AJAX (and even more so when Windows Vista comes along with its inbuilt web services, integral RSS, and so on), users are looking for rich Web client experiences, and that will still require quite powerful local processing. The fantasy of a cut-down, maintenance-free network client will always be a pipedream. But users won’t want to pay the futz penalty of having to look after such sophisticated local functionality for themselves. They’ll expect their client machines to be managed and maintained from the network.

"… Clearly, if there’s going to be a vendor with a presence on the user’s desktop, in a position of trusted advisor on matters such as software upgrades, security and the like, then Microsoft has a firm self-interest in being that vendor."

That explains why Microsoft is being so aggressive in its pricing for the newly launched Windows Live OneCare service — and as I pointed out last week, it also explains why Microsoft bought Softricity.

That’s why Microsoft, McAfee and Symantec will continue to ignore George Ou’s advice about shifting anti-virus software off the desktop. Personally I would rather see it hosted in the network anyway, which I fully recognize is a big leap further than George would endorse.

June 5th, 2006

Would you make this big a bet on SaaS?

Posted by Phil Wainewright @ 10:27 am

Categories: Business applications, IT outsourcing

Tags:

Network World last month reported on Vedior North America, a $1-billion-a-year staff placement agency that is implementing a hosted staffing and recruiting application to run its business.

Yep, you read that right, Vedior’s core business activity is recruitment and staffing,Maybe adopting the SaaS model is a source of competitive advantage and it’s going to run that core activity on hosted software. Thus breaking the very first of ZDNet’s IT Commandments: Thou shalt not outsource mission-critical functions.

CIO Peter Ross admitted to Network World that this was a bold move: "We need a very good sales and recruiting organization. That activity is critical. We mess up the candidates, or we mess up the clients — we’re dead."

So why on earth did Vedior make such a huge gamble? Read the rest of this entry »