Is the Cloud Always Cheaper?

Office 365 and Exchange Online are good offerings – they provide useful functionality, a growing feature set, pretty decent uptime, and they’re relatively inexpensive. Microsoft, in this third major iteration of cloud services, has done a good job at offering a comprehensive set of applications and services. (We use Exchange Online internally and are quite pleased with it.)

From Microsoft’s perspective, the primary reason to move their customers to the cloud is to make more money. In 2015, Microsoft told Wall Street financial analysts that moving its customers from a “buy” model to a “rent” model will generate anywhere from 20 percent to 80 percent more revenue for the company. As evidence of how right Microsoft was, the company’s Office 365 revenue for the fourth quarter of 2017 is now greater than its revenue generated from traditional licensing models.

From a customer perspective, one of the key reasons for migrating to Office 365 is to reduce the cost of ownership for email, applications and other functionality. Our cost modeling has demonstrated that this actually is the case.

So, Microsoft makes more money from the cloud, but its customers spend less when migrating to the cloud. On the surface, that doesn’t seem to make much sense until you realize that the cost savings for customers are coming primarily from the labor that you no longer have to pay to manage an on-premises system, and from the stuff you no longer have to buy to maintain it, especially when considering hardware and software refresh cycles.

But what if you’re a small organization that wasn’t spending much on labor because you have an easy-to-manage email server, for example, and your hardware requirements to run it are not significant? Let’s go through an example comparing Exchange Online Plan 1 with Alt-N Technologies’ MDaemon Messaging Server for a three-year period for a 50-user organization:

Exchange Online Plan 1

  • $4.00 per user per month
  • $7,200 for 50 users for three years

MDaemon Messaging Server (with priority support)

  • $2,433.04 initial cost, or $1.35 per user per month for three years

MDaemon Messaging Server (with priority support, Outlook Connector and ActiveSync)

  • $4,678.43 initial cost, or $2.60 per user per month for three years

So, the on-premises platform will save a 50-seat organization anywhere from $2,522 to $4,767 over a three-year period. If we assume that an on-premises email system like MDaemon could be managed by an IT tech making $35,839 per year (the national average for that position according to Glassdoor), that means the tech could work anywhere from 4.1 to 7.7 hours per month on the MDaemon infrastructure to bring its cost up to that of Exchange Online Plan 1, although it’s unlikely that much of a time investment would be required. Of course, I have not factored in the cost of the hardware necessary to implement an on-premises email system, but most organizations already have that hardware on-hand already.

The point here is not to abandon consideration for Exchange Online or other cloud platforms, since they offer a number of important benefits and there are good reasons to go that route. But for organizations that need to get the most bang for their buck, they will be well served to consider using on-premises solutions, especially if their hardware and software refresh cycles are longer than three to four years. That’s especially true for things like desktop productivity platforms like Word, Excel and PowerPoint, where the average refresh cycle is quite long (one survey found that Office 2010 remained the most popular version of Office in use five-and-a-half years after its release.)

Tim Tebow and Non-Microsoft Mail Systems

Exchange, Office 365 and Outlook dominate the business email market today and we are forecasting that they will gain market share over the next two years. There are three basic reasons for Microsoft’s dominance in the business email market.

  1. First, these offerings are pretty good – they work more or less as advertised and they integrate nicely with a wide variety of other solutions from Microsoft and other vendors.
  2. Second, they’re from Microsoft, the “IBM of the 1960s” choice for decision makers who often want to take the more conservative route by using only established, household names for their IT infrastructure.
  3. Finally, whether this was intentional or accidental, it was genius on Microsoft’s part for “Outlook” to become synonymous with “our corporate email system”. As I’ve written about in a previous blog post, many business decision makers have pushed their IT department toward Exchange because they like Outlook, assuming the latter is the email system and not simply an email client.

Non-sequitur: Tim Tebow is an incredibly polarizing figure in the NFL: virtually anyone who knows about his brief tenure in professional football either loves or hates him, but there are scant few in the middle. Despite leading the Denver Broncos to the playoffs in 2011, he never started another NFL game and today is only a memory in professional football.

Why? It might have to do with his outspoken Christian faith, charges that he doesn’t practice well, or his being a “distraction”. While the reasons for his not being in the NFL vary, it probably wasn’t because of his performance. For example, Tebow’s career Total Passer Rating is better than the rating for some of this year’s NFL starters. In his playoff-clinching 2011 season, he threw for 12 touchdowns, tied with or better than eight of this year’s NFL quarterbacks. In his first year in the NFL, his passing yards-per-attempt stats would place him fifth among this year’s quarterbacks, ahead of Russell Wilson, Andrew Luck, Philip Rivers, Tom Brady and Cam Newton.

In some ways (and, yes, I know this will be a bit of a stretch for some), many mail systems are like Tim Tebow in one important respect: they’re better than some of the mail systems that are more commonly deployed, even though there are good reasons they should be selected. For example, a single administrator can run a Novell GroupWise deployment for 15,000 users, a level of administrator efficiency that more commonly deployed mail systems can’t match. Alt-N MDaemon Messaging Server is dramatically cheaper than Exchange Server 2013 Standard – 94% cheaper. Notes/Domino runs on a much wider variety of server platforms than Exchange. Zimbra has a number of advantages over Exchange in terms of cost-of-ownership and ease of deployment.

Again, this is not to say that Exchange is not a solid offering from an even more solid vendor. But there are reasons to at least consider other email platforms that might not be as conventional, “safe” or popular.