February 17th, 2006

What's the true cost of running email in-house?

Posted by Phil Wainewright @ 9:57 am

Categories: Collaboration, IT outsourcing

Tags:

There’s been a bit of a debate going on here amongst ZDNet’s bloggers, both publicly and privately, about whether it’s better to outsource email or keep it in-house. Behind the scenes, George Ou is even trying to cost a list of all the ingredients required to set up a redundant Exchange architecture, including software and staffing, so as to prove that it’s "cheaper" than paying an outsourced provider.

You know what? I’ve come to the conclusion that most people who are in favor of keeping email in-house are simply prejudiced. I don’t see them including any costs for management and monitoring software to make sure that the system stays up and running and to send alerts if it doesn’t."Most companies do not understand the true, hard costs of their messaging systems" I don’t see them including the cost of holiday cover or overtime for the email administrator, so I guess if the system goes down at 8pm everyone will just have to wait until next day before it comes up again. There just seems to be an unspoken assumption that, so long as you set it up right, the in-house system just isn’t gonna fall over (or if it does, only during office hours). Whereas (the assumption continues) everyone knows that outsourced providers are always having outages … The other interesting question I have in my mind is, how did we end up centering the discussion on Exchange hosting when it was originally sparked by Google’s moves with Gmail? Where’s the price comparison of an in-house Gmail infrastructure compared to the cost of Google’s service?

Anyhow, my role as the resident SaaS blogger here on ZDNet is to be prejudiced the other way, so I decided to ask an expert on email outsourcing to put his point of view. Patrick Fetterman is president of Mi8, an innovative New York City-based company founded in 1997, which specializes in providing hosted Microsoft Exchange as a subscription service.

Patrick and his company have had long experience of dealing with most companies’ natural diffidence about email outsourcing, so he takes a much more conciliatory line than my own provocatively combative approach to such matters. But what struck me most about what he put down was his final point, so I’m going start there and then work back, because I think it underlines the way this argument is dominated by perceptions and prejudices rather than hard facts (I’ve added emphasis to some of his words):

"Amazingly, every company we talk to has a TCO for their messaging system that is far below the industry average, and uptime that is far above the industry average! I don’t mean to poke fun, but it’s become blatantly obvious to me that most companies do not understand the true, hard costs of their messaging systems, nor do they accurately measure their downtime. We assist companies in calculating these numbers, and they are often shocked by what they discover."

He goes on to add that the point of outsourcing isn’t usually to save money, but to improve the performance and reliability of email:

"Outsourcing is not usually an enormous cost savings, but it is predictable, which is often a benefit (and it should be at least roughly equivalent to your internal costs, not significantly higher.) Also, outsourcing can deliver an improvement in reliability and performance, especially if you’re on an older, trouble-prone system, or if resources are hard to come by."

He prefaced these comments with a balanced assessment of the factors to be taken into account when weighing up whether or not to outsource email:

"There are many reasons to consider outsourcing a messaging system, but in my opinion, there is no silver bullet to this, no one item that says, ‘You absolutely MUST outsource your messaging!’ Rather, it’s how your organization weighs several different factors:

• The mission-critical nature of email
• The availability and cost of talented email administrators in your geographic region
• Your overall IT budget and project calendar
• The required feature-set
• Integration with other systems
• Regulatory requirements impacting email

"I disagree with some previous posters in whether or not a company should consider outsourcing a truly mission-critical system, but it must be in balance with the other issues listed above. Email has become mission critical for most companies, just like the phone system and an Internet connection, but like these other systems it is NOT a core business function of the company; rather, it is an infrastructure service. This should put messaging on the top of the list of systems that should be considered for outsourcing."