Cloud-Based Email – Bringing in the Savings, and the Value

Grab a cup of Tea – this is a long post I’m afraid…

I posted awhile ago about Rackspace’s hosted email offering – a product review however tells only half the story. For this reason I wanted to follow up and look at the benefits the various cloud email providers can bring to their customers, discuss the relevance of hosted email for large and small organization and touch on some of the pitfalls people identify,

One of my businesses recently deployed Rackspace email the other day – since I already had entities using Zoho mail (disclosure – Zoho are sole sponsors of CloudAve) and one using Gmail, it seemed time to try Rackspace’s offering too.

Speaking recently with someone who has been running with cloud-based email for awhile now, Chris Keswani, Marketing Manager at Uforia, it was good to get some hard metrics. Chris reported a large time saving from their move to hosted mail, along with a corresponding ability to focus on their core proposition. He reported (and I can but reproduce what he’s said) that over the dozen or so email accounts that Uforia have, they estimate a 400 hour annual saving in terms of support required with a traditional email solution.

Now I have to admit 400 hours is a significant amount of time but regardless of the exact number itself, Keswani’s contention that moving to a purely hosted email solution gives Uforia the ability to focus on its core business is a boon. In any case the time saving is only part of the gain – as we’ll revisit below.

I asked Rackspace for some metrics around the average customer size for their email solution – there’s long been much discussion over whether SaaS is most relevant and/or valid for small business or whether it too has a place in enterprise – the graph below tells the story – over 80% of the Rackspace email customers have less than 25 seats.

Thinking that these metrics questioned the utility or attractiveness of hosted email for larger organizations, I spoke with both Zoho and Google about the proportions of large to small users of their respective email products.

Scott McMullan, mild mannered Partner Lead for Google Apps didn’t have much specific data beyond repeating the Google message about “1.75 million businesses” and “tens of businesses w/ > 1000 users” and “> 3k new businesses each day.” Although recent articles suggest that over 4 million decision makers of the future are using Gmail on campus.

Raju Vegesna, evangelist for Zoho (see disclosure above) however gave a enterprise-centric view of things that firmly indicated the value proposition of cloud email for enterprise;

There is no enterprise email solution – especially for larger enterprises. Sure, there is Exchange, but it is not really built to scale. It is designed to run even on a single server. It probably can handle few tens of thousands of accounts, but if you need more mail boxes for larger enterprises, they end up deploying multiple instances of Exchange further increasing the management headaches, cost etc. On the other hand, for larger scale, I think cloud apps are ideal. They are designed to handle millions of users by default (but in most cases, they cannot run on a single server like Exchange) and can dramatically reduce management headaches and costs.
Also, while comparing hosted and traditional systems, many companies just compare software costs. They don’t consider other costs like infrastructure (SQL Server, Windows Server etc), Hardware and management costs. Apart from the licensing costs, the management costs are pretty high.

Double answer to my questions above; yes, cloud mail makes sense for all sizes of business, from minnows to the largest enterprises, and the cost savings to be gained go way beyond simply time – there are significant costs both in terms of hardware and software that cloud mail products can help with.

Looking to the larger business side of things, Google has had some success this week with New Zealand Post announcing that they’re moving from Outlook to Gmail for all their staff. Across NZ Post’s 2100 staff they’re expecting a $2 million saving over three years along with the gains brought from a much larger mailbox size and the ability to collaborate via video chat. I had a couple of really interesting emails the day after that news was posted – one looking at economic implications, the other security ones.

First from an economic perspective. My correspondent wished to remain anonymous but pointed out that;

…previously, a company.. would have employed local people or had an outsourcing agreement with a local company for these services — i.e. the supply of the hardware, the purchase and installation of the software, and the ongoing operation of their systems. There’s then the ongoing upgrades and maintenance… Now, moving to a cloud-based service for this may make sense from the perspective of internal budgets and IT spend, but what of the general economic impact?…if more and more companies migrate to cloud-based services, how does this affect investment in the country’s IT providers, outsourcers, and integrators (hardware, software, services). Furthermore, how does it affect the economy in NZ where domestic IT providers can no longer compete with the cloud service providers which have comparatively enormous economies of scale. With overseas cloud providers aggregating and declaring revenue locally, this is money effectively being spent overseas and not re-invested in NZ.

My correspondent raised some excellent issues here, and I’m a little conflicted since I’ve long been a proponent of supporting local enterprise. However the bottom line here is to assess whether the benefits from the move increase productivity beyond the losses inflicted by the move. Put simply if moving the expense of maintaining a local email presence then enables NZ Post to create innovative new products that are related to its core business and that it can then take out and built revenue from – the move is a positive one. However if all it does is gut out the local IT support area, it’s net negative.

Having said that, out of the ashes often rises something new and I’ve come across a number of former enterprise IT people who are doing exciting things by partnering with both cloud computing players such as Google and loc
al organizations and building themselves viable service based busin
ess from that. In this case local consultancy Fronde steps into the breech as the “preferred” Google Apps reseller here while new startups such as WaveAdept create small, nimble consultancies that can help companies gain the efficiencies that cloud services can bring.

The second comment I got dragged out the usual concerns around security of data, my correspondent said;

A lot of sheep are jumping on it as the new buzz-word compliant architecture. Personally, I think they’re mad to put anything sensitive on someone else’s servers, no matter how you wrap it up. Banks struggle enough with their own on-line banking services, and those problems are trivial compared to running third-party applications on shared servers. It’s only a matter of time until someone exploits a cloud, and the ramifications could be disastrous. Something about eggs and baskets springs to mind.

Ah… the hairy old security chestnut huh? As I said to the correspondent, I understand where they were coming from here but the fact of the matter is that recent studies found that 12000 laptops are lost a week in US airports. The security challenges of this number eclipses any concerns over a move to email being in the clouds – especially when the benefits of increasing service levels (large storage sizes, built in video chat etc etc) is taken into account. Yes there are risks involved in storing information in the clouds as there are in storing information anywhere outside of someone’s mind, but we accept the fact that a calculated risk is worthwhile if the rewards it brings are sufficiently large – a move to cloud mail (or cloud office productivity generally) brings significant rewards in my opinion…

It’s interesting times and as these players, and others, gain momentum in the email space, it’ll be interesting to see the response from Microsoft…