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Hosted email will boom in the short term, study says

Attractive pricing, more relaxed views about off-site security and the acceptance of SaaS will accelerate hosted email adoption.

Will attractive economics of hosted email make this service-based offering a staple in many enterprises within just a few years?

It's not unthinkable, according to a study just out from Gartner Inc., the Stamford, Conn.-based consulting firm. According to Matt Cain, a Gartner analyst, the market for hosted email today is only 1% but that is expected to grow to 20% by 2012.

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There are several reasons for the growth. First, the cost of hosted email is projected to drop from an average of $10 per user per month to about $2 per user per month.

Second, although many IT managers in Windows shops today have concerns that off-premise email storage may not be as secure as managing an Exchange server in house, those concerns are starting to disappear.

"We think maybe 25% to 30% of antispam and antivirus filtering is done in the cloud," Cain said. "When this model came out about five or six years ago, everyone had security concerns, and folks got over it. Now this [Software as a Service] is going on on all sides of us."

IT managers often say they are loath to allow corporate data off premise, but Cain said he believes that the initiative for moving to hosted email won't come from IT but from the executive suite. "Board-level people will say email is a commodity and the whole world is moving to SaaS," Cain said.

For companies in certain industries or with special messaging storage needs, a hosted model may never work, he added. Cain said the demand will start with small companies and move through midsized and then to large enterprises.

Microsoft has moved aggressively toward hosted messaging and collaborative services, with the acquisition of FrontBridge Technologies Inc. in 2005 and its subsequent release of Microsoft Exchange Hosted Services, the rebranded technology. It also released SharePoint Online Services last year. Cain said he believes that Microsoft's stepped up services releases are driven by the presence of Google Inc. in the SaaS market.

Vendors who are trying to crack the market today need a service and not a premises product. "Google has a service and Yahoo has Zimbra, but the last time a vendor released a premises tool was Oracle's [Collaboration Suite]," he said. "[Oracle] spent tons of money and had little impact on the market."

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