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The real price of Exchange Server in the cloud

Do you think moving Exchange to the cloud is a good fiscal decision? Run the numbers again. What you save on an initial investment may cost you down the road—in more than simple dollars and cents.

Microsoft has been heavily invested in the cloud for some time and is continuing to push cloud-based applications....

Operating Exchange Server in the cloud might sound like a great idea, but it makes a lot of sense to examine the pros and cons of doing so before you spend time convincing others that it’s the way to go.

Savings or losses: Running the numbers
For many organizations, the most attractive aspect of running Exchange Server in the cloud is the cost savings. Running Exchange Server on-premise isn’t cheap. At a minimum, it requires a reasonably equipped server, a Windows Server license, an Exchange Server license, client access licenses for Windows and client access licenses for Exchange. Therefore, even a small Exchange Server deployment can require an initial investment of several thousand dollars.

In addition to initial costs, there are guaranteed to be additional costs for ongoing server maintenance, antivirus software licenses and necessary backup infrastructure. Furthermore, most Exchange Server deployments require multiple servers.

Cloud-based Exchange Server deployments, on the other hand, are almost always subscription based; no initial investment is required. Some service providers may charge a setup fee, but it’s usually minimal compared to the cost of purchasing your own Exchange Server.

The cost of running Exchange Server in the cloud varies from one service provider to another, but the average cost seems to be around $5 per mailbox per month. While that price may seem ridiculously inexpensive, remember that the cost of the subscription is ongoing and will eventually surpass the cost of running Exchange on-premise. For example, if an organization has 100 users and wants to deploy a single Exchange Server, the initial deployment costs might break down similar those shown in Table 1.

Table 1. Initial costs of an on-premise Exchange Server 2010 deployment


Server hardware $3,000
Windows Server 2008 R2 Enterprise Edition license (includes 25 CALs) $3,999
75 Windows Server 2008 R2 Enterprise Edition CALs $2,994
Exchange Server 2010 Enterprise Edition $3,999
100 Exchange Server 2010 Standard CALs $6,700
100 Exchange Server 2010 Enterprise CALs $3,500

This price estimate assumes that the organization already has the necessary domain infrastructure in place. If the organization had used the per-device license model when licensing clients to connect to the existing Windows Server infrastructure, then the Windows Server CALs can be removed from the cost estimate.

Likewise, if the company plans to deploy Exchange Server on a virtual server running Microsoft Hyper-V, then the existing Windows Server license may be sufficient. In that type of situation, you could also eliminate the hardware costs from the estimate, which would bring the total cost of the deployment down to $14,199.

But for the sake of comparison, we’ll focus on the worst-case pricing of $24,192. A cloud-based deployment for 100 mailboxes at $5 per mailbox per month would cost the organization $500 per month. At that price, it would be four years before the cost of the cloud-based Exchange Server deployment would exceed the cost of the on-premise based deployment.

If you base calculations on the more reasonable $14,199 on-premise deployment cost, then a cloud-based deployment would exceed the initial cost of the on-premise version in just over 28 months.

If you calculate your costs based on these figures alone, an on-premise deployment will always be less expensive in the long run. Even so, here are some factors that must be taken into account:

  • If you run Exchange on-premise, how long will it be before you upgrade to a new version?

  • What is the cost of repairs and ongoing maintenance?

  • If you subscribe to a cloud-based deployment, will the service provider raise your rates over time?
  • Are there additional charges for bandwidth or for excessive storage?

Built-in management and third-party problems
The techniques used for managing cloud-based Exchange servers are largely the same as those used to manage on-premise deployments. Microsoft has designed the Exchange 2010 versions of the Exchange Management Console (EMC) and Exchange Management Shell (EMS) so you can use them to manage any Exchange server -- regardless of whether it is on-premise or in the cloud.

Although the built-in management tools will work fine in either situation, it may not be the case for third-party products you’re using. For example, you may find that your message archiving software requires an agent to run on each mailbox server and that your service provider will not allow you to run the required agent on its servers.

Adhere to regulations and compliance
For many organizations, one of the most difficult components of Exchange Server administration is complying with various federal regulations such as Sarbanes-Oxley or HIPAA, which set stringent guidelines on how servers must be configured, managed and maintained.

When Microsoft initially announced that Exchange Server would be made available as a cloud service, many industry analysts predicted that outsourcing Exchange to a cloud service provider might make it easier for some organizations to comply with the various regulatory requirements.

As more enterprises run Exchange Server in the cloud, it has become apparent that the cloud is something of a mixed blessing when it comes to regulatory compliance.

In some ways, running Exchange in the cloud makes perfect sense for companies that must adhere to regulatory requirements. For instance, virtually all messaging-related regulations mandate that email servers -- especially those containing message archives -- be tamper-proof. One way to protect servers against tampering is to have good physical security. When you run Exchange in the cloud, physical security becomes a nonissue because no one in the enterprise knows where the servers are located.

Although operating Exchange Server in the cloud can make it easier to comply with federal regulations in some ways, other aspects of cloud computing can make adhering to regulatory compliance more difficult.

Running servers in the cloud can present a problem during a compliance audit. You need to be sure that the cloud service provider you select has a proven method in place to meet regulatory compliance and that it will take corrective action if something is not archived properly.

In one instance, an auditor refused to certify the organization as compliant because the servers were not on-premise. As such, he could not verify the server’s physical characteristics such as fault tolerance and security.

It’s not that you won’t ever be able to maintain compliance if you outsource services to the cloud. However, compliance is something you must consider carefully when choosing a service provider. Vet service providers carefully to be sure they can live up to their compliance claims. It’s also a good idea to ask for references before fully committing to one vendor.

Are you hiring your replacement?
Many administrators question the sanity of moving Exchange Server to the cloud. Could doing so potentially put an administrator out of his job? The hard fact is that running Exchange Server in a cloud isn’t going to do away with all day-to-day administrative tasks. On the flip side, what will remain are many of the more mundane tasks.

For example, if you operate Exchange Server in the cloud, you will no longer have to perform patch management, server monitoring or server optimization -- your service provider will handle this. Admin responsibilities will consist largely of setting up mailboxes or managing the message archives, all tasks that anyone with minimal Exchange Server skills can perform. And that could be bad news for senior-level Exchange Server admins.

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