Exchange hosting makes a comeback

If you thought the concept of Exchange hosting ended with the era of the dot-com, think again. It's making a strong comeback -- and for all sizes of organizations.

(This is the first in a series of articles about Exchange hosting. Future installments will discuss pros and cons, selection criteria and costs versus benefits.)

If you thought the concept of Exchange hosting ended with the era of the dot-com, think again. It's making a strong comeback -- and for all sizes of organizations.

Several developments -- technical and business -- are fueling this tipping point for e-mail outsourcing, which generally involves soup-to-nuts support from an application service provider (ASP) for installation, licensing and daily Exchange administration.

Cached mode and the Internet

Exchange hosting became truly viable as a technology accessible over the Internet with the release of Microsoft Exchange Server 2003 and Microsoft Outlook 2003's Cached Exchange Mode. Cached Exchange Mode is a much-improved implementation of "Offline Folders." It keeps a copy on the hard drive of each user's entire mailbox and automatically synchronizes with the server every 60 seconds in the background without interrupting the user. Everyone can work off the cached (local) copy of their mailbox and not experience the effects of latency when reaching the server across the Internet even if the server is on the other side of the globe. Cached mode also has the effect of significantly reducing the overall amount of data sent between the server and Outlook after the initial sync.

The other two key technical developments in Exchange Server 2003 are compression, which reduces bandwidth, and Remote Procedure Call (RPC) over HTTP (RPC/HTTP) protocol. RPC/HTTP tunnels all communications between Outlook and Exchange inside the HTTP protocol and then, encrypted via SSL and sent over port 443. This encrypts all Exchange/Outlook traffic, bypassing firewall port blocking issues, since SSL port 443 is rarely blocked. RPC over HTTP not only increases the security of communications across the Internet, but also eliminates the need for virtual private networks (VPNs) to access e-mail via Outlook.

Another factor is the ubiquity of high-bandwidth Internet access -- namely more affordable T1, DSL and cable modems. Although Exchange 2003 and Outlook 2003 require less bandwidth than their predecessors, they function best with at least some sort of broadband connection.

Survivors vs. providers

The early ASPs raised millions in venture capital for e-mail hosting and focused on large enterprise customers, most of whom were wary of outsourcing mission-critical e-mail systems to young companies. With few successes to fuel them after the crash, most of these ASPs collapsed and disappeared. Only a few have survived and evolved.

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Today, there are also a handful of new, smaller and more pragmatic companies offering Exchange hosting to IT managers who are attracted to the idea of hiring specialized vendors with better physical protection and processes than their own individual companies can afford and maintain. Because of their narrow focus, Exchange hosting vendors, for example can -- theoretically -- stay up to date on the latest security issues surrounding e-mail, because that is their core business.

Typically, services revolve around a comprehensive e-mail feature set. They offer Exchange Server 2003 access via all the different protocols that Exchange server offers: MAPI, RPC over HTTP, POP3, IMAP4, SMTP and VPN. For remote access, they offer Outlook Web Access, Outlook Mobile Access (a simple text version of OWA, but for mobile devices), ActiveSync for wireless syncing with Pocket PC, Smartphone or Treo 650 devices and BlackBerry Enterprise Server for two-way wireless sync with BlackBerry handhelds.

Exchange hosting service providers also implement virus scanning, spam filtering, comprehensive backups and quick mailbox restoration policies, all of which are often major headaches for administrators. Some vendors even offer advanced features such as archiving for compliance. Using an Exchange hosting service also gives you a Microsoft Outlook (any version) license for each user.

Some common concerns I've encountered from organizations that are considering using Exchange hosting and my responses include:

Will my users complain about Outlook's speed in accessing Exchange server across the Internet?

Because Outlook 2003 in cached mode keeps a mirror copy of each user's entire mailbox, the users actually access data off that local copy on their hard drive, eliminating latency issues. (Exchange's native MAPI protocol is great on an organization's internal high-speed network, but problematic over slow connections).

How much bandwidth do we need? Will a DSL line work for 50 users?

Outlook synchronizes changes with the server only every 60 seconds, which means that all users are not constantly communicating with the server and using bandwidth at the same time. So, yes, a DSL line is typically enough for 50 users; a T1 is typically enough for a few hundred users.

How do we make changes, i.e., add users, modify distribution lists, etc.?

Most of the Exchange hosting ASPs provide a Web-based interface that allows you to take care of most day-to-day tasks. The functionality varies from vendor to vendor.

Are there any requirements or prerequisites that we need in order to use Exchange hosting?

No, while older versions of Outlook (97/98/2000/2002) work with Exchange hosting, optimal use is experienced with Outlook 2003 in Cached Mode. Most ASPs even support the Mac and Entourage 2004.


Lee Benjamin has more than 20 years of experience in the messaging industry. Since retiring from Microsoft in 1997, he has consulted through his company, ExchangeGuyConsulting, for enterprise- and medium-sized organizations and software firms. His main interests are migrations, directories, security, mobile access, calendaring integration and RSS. Benjamin is also a regular trainer for PinnacleTraining Corp., an analyst at Ferris Research and a regular contributor to SearchExchange.com.

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