November 10, 2004
Radicati Sees Growth In Exchange 2003-Based Hosted E-Mail Market
The combination a better Exchange product and a growing need to get e-mail out of IT's hair is making for a vibrant market.
Deployment of Microsoft Exchange Server 2003 has made a significant impact on the use of hosted e-mail services by enterprise users. That is the major conclusion of a new study released this week by Palo Alto, Calif-based Radicati Group, the research company that focuses on messaging systems.
The report's principal analyst Marcel Nienhuis said that this year has been one of opportunity for hosted e-mail providers. That's because Exchange 5.5 customers have had to face the difficult decision: should they upgrade to Exchange 2003, and to maintain their anti-spam, anti-virus, compliance, and storage and archiving technologies, or should they just turn to a hosted solution.
"Some exceptionally dangerous virus outbreaks have also led more companies to consider hosted email over the past year," said Nienhuis. Radicati research shows that the result has been a growth of around 10% in the number of business mailboxes running on Exchange servers hosted by outside firms.
One motivation for all this activity is the fact that most hosted business email providers that offer hosted Exchange have now made the transition to Exchange 2003, and the system is much more suitable to hosted services than previous editions of the product. Exchange 2003 offers much greater scalability which enables hosted email providers to service more customers with fewer servers. The result is lower cost per mailbox for providers and customers alike, helped along by Exchange 2003's secure HTTP messaging " there is no need for an expensive and difficult virtual private network connection.
The market for hosted Exchange e-mail services is at the same time becoming more competitive. There has been a growth in the number of companies, and that has impacted prices and feature offerings. The price drop has been accelerated by the reduced costs. "In general the drop over the last twelve months has been up to 20%," said Radicati analyst Genelle Hung.
Service Differentials
And the fight is on to differentiate products " after all one Exchange 2003 server looks pretty much like another. Some hosting companies are offering free anti-spam and anti-virus services, while others are offering more extensive levels of e-mail archiving.
Anti-phishing tools are a particularly important feature that contributes to differentiation, but while some companies are treating the phishing trips as just another form of spam, others are making special efforts to take direct action and to educate e-mail users at the client companies.
One way that hosted Exchange 2003 e-mail companies are differentiating their products is to give enterprise administrators more control over the system. "Losing control of messaging has been an important barrier to enterprise use of hosted e-mail services," said Hung. As a result some companies are making sure customers get better control. One example in the report is Intermedia.net which gives its hosted e-mail customers something called the HostPilot Control Panel, which lets enterprise administrators create and manage mailboxes, assign permissions, create custom tags, and more.
Another approach to differentiation is cafeteria-style service offerings, in which e-mail administrators are offered individually priced options to choose from. BlueTie for example has introduced a standard service at $2.99 per mailbox, and users can choose from an array of additional features at $1.00 per month per feature.
All of this activity around Exchange 2003 is happening in the midst of an environment where 67% of all mailboxes are running on hosted services. That figure of course includes all of the free web-based services from Yahoo!, Hotmail, and Gmail, and AOL which has a huge share of the consumer e-mail market sewed up.
For more information and to order a copy of the report, visit .
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