Executive Summary: Although hosted email might make more sense for small and medium businesses than the integrated version of Microsoft Exchange Server that comes with Small Business Server (SBS) 2008 and Windows Essential Business Server (EBS) 2008, Microsoft defends the need for Exchange Server.

All Microsoft teams that work on software products insist that they are committed to the Software Plus Services (S+S) strategy. However, some teams are in the odd position of having to support the company’s move to the cloud while also being responsible for delivering software-based solutions. A case in point arose when I was preparing this month’s cover story on Small Business Server (SBS) 2008 and Windows Essential Business Server (EBS) 2008. I talked to the Microsoft teams responsible for those products and also got input from two SBS MVPs, Susan Bradley and Nick Whittome (see “SBS 2008 and EBS 2008 Build on Knowledge Every IT Shop Needs,” page 27, and “SBS 2008 and EBS 2008: The View from the Trenches,” page 29). Susan and Nick noted that hosted email sometimes makes more sense for small and midsized businesses than the integrated version of Exchange Server that comes with SBS and EBS. But the Microsoft representatives, while loyally supporting S+S, had to defend the need for Exchange Server as part of their products.

The Microsoft View
Stating Microsoft’s position, Devesh Satyavolu (a product manager for the family of Windows Essential Server Solutions, which includes SBS, EBS, and Windows Home Server), said “Microsoft’s path towards cloud computing is an evolution, and all products are on that path, including SBS. In fact the version that we’re talking about here already integrates with cloud-based services right now.”

Guy Haycock (senior product planner for SBS) added, “There are five pieces of new S+S in SBS 2008, compared to none in SBS 2003. I think it’s good that Microsoft has multiple choices for small businesses.”

And Devesh listed some good reasons for considering software solutions such as SBS and EBS instead of a hosted solution: “If you’re in the midmarket, chances are you already have an existing IT infrastructure, a couple of servers. So the first questions to ask yourself are, ‘If I’m going to subscribe to some online service, how will that integrate with my existing infrastructure? When I configure a user in my AD on premise, will that \[configuration\] connect with the cloud?’ That’s a big question. Second, ‘Will the cloud solution automatically provision users, apply patches, and things like that?’ Also, if you have a line-of-business application, some mission-critical apps are still not cloud enabled. Next, people are concerned about control. For doctors, there are serious privacy implications. Then there’s the question of languages, availability, and support. Finally there’s cost. The pros for services are you remove the hassle of maintaining, etc. But I’ve heard customers say, ‘Look, I’m paying this monthly fee and I don’t own anything.’ It goes back to the question that we’re on a path here.”

The MVP View
Susan and Nick agreed that different situations will demand different solutions. However, the MVPs added some real-world perspective. Susan noted, “Gartner believes every firm with one thousand seats or less should look to web-based email.”

Nick said, “I think that Gartner is correct about small companies looking at web-based email, but they have the \[company size\] wrong. We are looking more and more at hosted solutions for companies that have under 10 users. Some industry pundits state that all small and medium firms would be best served placing their messaging role in a cloud. I’m not convinced this is right for every firm. But I certainly see the need.”

Susan noted, “I’m not sold that web email is the right solution for all clients. Many of us, for paranoia or security reasons, still need on-premises servers.”

Nick agreed, “Some firms may wish that the messaging server role was cloud based. However, given retention and legal needs of the firm, an onsite messaging server may be preferable over a cloud-based one. Regardless, to anyone deploying any sort of on-premises messaging server, whether EBS or SBS, I would recommend a cloud-based filtering solution in front of the server. I see the initial interest in this solution being evangelized most by consultants whose firms have outgrown their seventy-five users/devices networks based on SBS 2003.”

The Recommendation
In typical Darwinian fashion, Microsoft’s new direction toward cloud computing is competing with the traditional software business even while the company insists that the strategies are complementary: It’s not software or services; it’s software plus services. The benefit of this forced marriage is that customers have choices. I’d love to hear whether this issue of hosted services versus software products affects your IT decisions. Send me an email and let me know.