April 28, 2010, 9:20 PM — Microsoft Corp. has been ramping up its cloud-based Exchange Online offering for its largest customers -- even though that may mean cannibalizing its own on-premises Exchange Server installed base.
Microsoft has always offered an online option for Exchange Server through its business partners. But that traditional hosted service offering, now called Exchange Online Dedicated, simply moves a dedicated Exchange Server infrastructure to someone else's data center.
Exchange Online Standard is different. The shared, multitenant service, launched 18 months ago, is a true cloud offering that competes more directly with the Gmail and Calendar components of the Google Apps for Business service. (See related story: "Corporate e-mail in the cloud: Google vs. Microsoft.")
Although the online version of Exchange was initially focused more on consumers and small businesses, Microsoft has gotten aggressive in targeting the service toward larger users -- even though that means cannibalizing its on-premises Exchange Server business.
"It used to be that Google Apps for Premier Edition was half the price of Microsoft. Now Microsoft Exchange Online Standard is $5 and Google is $4.17 per month per user," says Ted Schadler, an analyst at Forrester Research. Microsoft also upped the ante by increasing the total number of seats it can support per organization from 10,000 to 30,000. (Microsoft has not "performance-tested" larger deployments. Deals for more than 30,000 seats need approval by Microsoft's business productivity suite engineers, a spokesperson says. Google does not have a per-organization seat limit for Google Apps for Business.)
"Most customers will save money by moving from on-premises to online e-mail. The economies of scale and efficiency with which we can run the environment are hard to rival," says Julia White, director of Exchange.
Microsoft is gearing up to fend off potential challenges of online providers that could poach users from its on-premises Exchange clients. Other players, such as IBM and Cisco, have also come forward with cloud-based e-mail services, but Microsoft seems laser-focused on one particular upstart. In the cloud, says Schadler, "it's mostly Google and Microsoft right now."