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Is hosted email cheaper than inhouse?

One of the factors that has aways held back the adoption of hosted services (whether it is on an ASP or SaaS model) has been the cost. In otherwords, despite all the operational benefits it has always seemed cheaper (and we appreciate that the true cost of ownership is frequently under-estimated) to buy a system and run it on an inhouse basis. Now e-know.net, a provider of SaaS and other hosted services, has produced a price comparison showing the difference between running an inhouse email solution and using their messagehub hosted service. (Yes, we know, the use of all this lower case text is just so 1990s.) Anyway, e-know.net reckon that over a three year period, the cost of messagehub works out to about a third of the cost of the inhouse solution. And, if your are interested, messagehub (+44(0)1952 236200) is currently offering a free try-before-you-buy option so you can assess whether hosted is a viable alternative to an inhouse email infrastructure. www.messagehub.co.uk

You can find the cost comparison here.

6 replies on “Is hosted email cheaper than inhouse?”

If only ALL i dealt with (as supposed IT person on £25,000 pa) was Exchange my life would be so much easier!! Highly exaggerated costs, and £64k for 3 years emails…… good god, i'm in the wrong profession!

Sorry – a typo – now fixed so it does point to the .co.uk address

The 'savings calculator' is one of the most risible I have ever seen. For a 600 person Exchange system, it will supposedly cost me £356K over three years, vs. £50K for a hosted solution, resulting in a £306K saving. Wow, can't wait for the managing partner to come dashing through the door demanding to know why we haven't signed up yet.
Hold on though, before you long suffering IT Directors and IT Managers groan in despair, I can save you! I've done a back of the fag packet Excel based on their model, but using realistic assumptions like:
a) Nobody in legal IT writes stuff off over three years and then immediately bins it. You are going to run it for at least two more years, so a five year cost model is more reasonable and plenty of firms would be sweating their ageing assets beyond even this.
b) I'm going to need hardware and licenses for domain controllers anyway, so it isn't a saving.
c) I'm going to need Windows licenses for my PCs anyway so it isn't a saving.
d) I'm going to have Outlook licenses anyway, as I need MS Office, so it isn't a saving.
e) I'm going to need a backup solution anyway, there might be a slight saving on the cost of backup tapes, but that is all.
f) If you can find anyone qualified to run a 600 person exchange system for 25K per annum in London then send their CV over to me at once! £40K is more realistic but still on the low side. In practice I reckon you'd need about 0.3person/year to run a 600 user Exchange system, not the 1.5 person/year they quote.
g) The calculator didn't even manage to work out their own monthly per user cost and showed it as zero. I've (quite reasonably) added that back in!
So I reckon the realisable saving of going hosted vs. running your own 600 person Exchange solution per year is:
They say (over five years and adding in their missing costs):
Own solution: £340K
Hosted Solution: £354K
Saving: (£14K)
I say (over five years and using real world assumptions):
Own solution: £130K
Hosted Solution: £292K
Saving: (162K)
I accept there are plenty of variables that one could add in and ways to make either option more or less expensive, but using their own assumptions it would be hard to show a significant saving. Bear in mind their own model comes out at £14K more costly over five years to go hosted, and I haven't even included any costs for actually making the transition (which could be £30-50K without even trying too hard).
When a more realistic model is used based on the assumptions set out above, the hosted solution comes out £162K more expensive over five years! Hardly bargain of the century, is it? There might be good reasons why you would want to go hosted (e.g. reliability, availability, focus on core business, agility, etc.) and be prepared to pay the premium, but cost savings are not the reason.

Very well put. We have looked at hosted services on several occasions and always come to thesame conclusion. It is just too expensive.
For the record, and to add to the debate, here is our calculation for a 50 user system.
My immediate comments to this would be that for 50 users, this could all be done on a Small Business Server and all within a £15K budget. It seems that most of the prices quoted are grossly over inflated and being so high must in fact include VAT which is reclaimed each year so this should also be considered.
I would say the following is a more accurate representation of costs…
Hardware £7,000
Front-End Exchange – Only required for remote access to mail (and so should be ignored)
Back-End Exchange – £4000 (One off purchase)
Domain Controllers (2 required @ £1500 each) £3000 (One off purchase)
Server Licensing £1,710
Windows 2003 (3 @ £320) – £960 (One off purchase)
Exchange 2007 – £750 (One off purchase)
User Licensing £11,950
Windows CAL (50 users @ £20) – £1000 (One off purchase)
Exchange CAL (50 users @ £47) – £2350 (One off purchase)
Outlook 2007 Client (50 @ £70) – £3500 (One off purchase)
AV / SPAM (50 Users) – £1700 per annum. – £5100
Backup £2,375
200/400GB Tape Drive in Exchange Server £800 (One off purchase)
Backup S/W – £900 (One off purchase)
Backup Media (£225 per annum) – £675.00
Personnel £24,000
1/3 full time admin staff (assuming they are also there for other duties)- £8000 per annum – £24,000
The above costs total £47,035 over 3 years which is in fact £17,090 cheaper than messagehub.
I don’t think we’ll be making the switch just yet!

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