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.)

Microsoft vs. Google vs. IBM

While there are a large number of cloud-based communication and collaboration solutions available, the “Big Three” in cloud-based communication and collaboration today are Microsoft Office 365, Google G Suite and IBM Connections Cloud (which includes a very good email solution called IBM Verse). I won’t go into what you get with each offering, but you can check out the various components, features and capabilities at the following links for Office 365, G Suite and Connections Cloud.

All of these offerings include robust email, instant messaging, document collaboration, file sharing and other tools, as well as lots of storage. All of these solutions are reasonably priced, although Microsoft’s high end plans are significantly more expensive than the other two (but they also include more capabilities). Microsoft’s solutions require the least disruption to the way that most information workers work, since the vast majority already use the Office suite of Word, Excel and PowerPoint; and Office 365, from a desktop productivity standpoint, is nothing more than a switch from purchasing a perpetual license for these applications to renting them in perpetuity.

From a long-term perspective, however, particularly for enterprise customers, IBM’s solution should be the subject of most decision makers’ serious consideration because of Watson Workspace. Watson, the “computer” that trounced Ken Jennings and Brad Rutter on Jeopardy back in 2011, uses cognitive capabilities to analyze social interactions among information workers. Watson is currently being used for cancer research, tax analysis and other data-intensive applications, but Watson Workspace is specifically focused on using these cognitive capabilities in the workplace. The goal of Watson Workspace is to help workers manage information overload, present the right data at the right time, and otherwise streamline work processes with the goal of making people more efficient. Microsoft and Google have analytics and other capabilities that are focused on similar aims, but neither of these vendors have capabilities that compares to Watson at this point. In short, Watson has the potential to revolutionize the way that people work with one another.

The problem for IBM, however, is two-fold:

  • First, IBM is generally more bureaucratic than either of their key competitors and has a more difficult time moving products from the conceptual stage into stuff that people can actually deploy.
  • Second, Microsoft and Google make it easy to buy Office 365 and G Suite, respectively. IBM does not.

As a test of the latter point, I had one of our researchers run a test to see how long it would take to set up an account in Office 365, G Suite and IBM Verse. She started on a weekday afternoon and found that it took six minutes to complete setting up an Office 365 account, four minutes to set up an account in G Suite — and 31 minutes to set up an account in Verse.

Now admittedly, IBM is not really focused on the single user market to nearly the same extent as Microsoft and Google. But the difficulty and length of time associated with setting up an account are indicative of IBM’s need to make its account acquisition process a bit easier and more transparent. This one-off market can result in the deployment of perhaps a few million seats, a market that just about any communications and collaboration vendor should pursue for its own sake, but also for the potential impact it could have on making these tools more familiar in the enterprise space.

In short, IBM’s communication and collaboration solutions are the best of the Big Three, but also the most difficult to acquire.

Some Thoughts on IBM Connect

This was my tenth IBM Lotusphere/ConnectED/Connect and, arguably, one of the best. A somewhat new focus, a new venue and a substantial number of people (2,400?) made for a very good event. The expo floor continues to shrink each year, but was still fairly busy most of the times I was there or passed by. Plus, holding the event in a new venue helps to minimize comparisons with past events that had 10,000 or more attendees.

IBM is pushing hard on its social message, integrating social collaboration across every aspect of its offerings: Notes, Domino, Verse, Connections, et al. Even more pronounced was the “cognitive” message – namely applying Watson technology to just about every aspect of the user experience, from identifying those emails that users need to address first to simplifying the calendar experience.

What was interesting is that the keynotes stressed capabilities – communicating more effectively, setting up meetings, and having better access to files – not product names. For example, while I would have expected Verse to take center stage as the hub of the user experience, the name “Verse” was surprisingly underemphasized (at least in the keynotes, although not so much in the breakout sessions). Apparently, according to the IBMers with whom I spoke about this, it was by design. IBM wants to emphasize what people can do, not the tools they use to do it. For example, the company emphasized its dashboard that is automatically populated for each user with content from Verse, Connections and other tools depending on how people work, but minimizes the identity of the specific platforms that host this information.

While I understand the capabilities-not-products approach, I’m not sure the market will agree. Microsoft’s success in the business communication space is attributable, in part, to the fact that it pushes hard on product identity: Exchange, Outlook, Office 365, Yammer and, more recently, Skype for Business. For example, there are many non-IT decision makers that tell IT they want “Outlook” as their corporate email system (when they really mean Exchange), not “the ability to manage email, calendars and tasks from a single thick or thin client interface”. I could be wrong and IBM’s research may indicate that people think in terms of capabilities and not products, but I don’t think so.

Moreover, when comparing Verse to Exchange Online or Gmail, Verse wins hands down in my opinion. The interface in Verse is cleaner, and the integration with Watson to apply analytics to email makes it the superior offering. Yet, many – even in the analyst community – have never heard of Verse. I don’t believe a strategy that deemphasizes the identity of this very good email platform is the right choice.

With regard to Verse, IBM is making headway here, although the company’s policy is not to reveal numbers from its customer base. All of IBM’s several hundred thousand users have been migrated to Verse and there are some useful new features and functions coming down the road. For example, an offline capability will be available at the end of March that will allow access to five days of email and 30 days of calendar (a future version will permit users to adjust the amount of content available offline). Two hundred IBMers are already using offline Verse. Given that the offline version using HTML 5 will suffice for the non-connected experience, there will not be a Verse client anytime soon, if ever. An on-premises version of Verse will be coming later this year. There are other developments to be made available soon, such as the ability to use Gmail and Verse simultaneously in trial accounts, that I will write about when they’re ready.

With regard to other vendors at Connect, I was quite impressed with Trustsphere’s LinksWithin offering that enables analysis of relationships within email, as well as Riva International’s server-side CRM integration capabilities that allow CRM data from a variety of leading platforms to be accessed within Notes, Exchange and other email clients and Webmail.