This mission of this article is to explore the various advantages and disadvantages for small to medium sized businesses of having internal versus using cloud hosted Microsoft Exchange Servers for email. The intent is not to recommend one choice over another but instead to give the decision maker for such an entity the tools to make an informed decision.

1. Microsoft Exchange Servers: Hosted vs. Internal
This mission of this article is to explore the various advantages and disadvantages for small to medium sized businesses of having internal versus using cloud hosted Microsoft Exchange Servers for email. The intent is not to recommend one choice over another but instead to give the decision maker for such an entity the tools to make an informed decision. For the purposes of this piece we will assume that the basic requirements of an exchange server are a mail server, calendaring software, contact manager, ActiveSync and archiving capabilities.
As cloud technology advances, there is no shortage of firms that offer hosted exchange services for small businesses. The majority of advertisements and comparisons done by these companies naturally show their services to be the obvious choice. While hosted exchange services can oftentimes be the most economical choice for a small business, it is important to consider both the advantages and disadvantages of these options.
Let’s start by examining the strengths of hosted exchange. There is no question that allowing another firm to host a server for you in the cloud is the easiest option to set up and comes with the benefit of having no upfront costs. The cloud option allows you to pay on a monthly basis, add/subtract users with ease and comes with at least some modicum of IT support (some plans require you to pay up for “premium” 24/7 support). For companies with employees using a combination of Windows, Apple or Blackberry devices, letting someone else take care of the compatibility issues can oftentimes be enough of an incentive to outsource this operation. Most of these plans will also provide at least basic antivirus software, licenses for products such as Microsoft Outlook and will even help you migrate all of your data over from existing servers.
In addition to the technical aspects of an exchange server, having it hosted in the cloud also eliminates some more real, tangible concerns. The user no longer has to worry about energy costs. There is no need to find a temperature controlled area for the server and hardware maintenance is no longer an issue. These benefits lead us to another area where the hosted exchange option truly excels: scalability. As the small business grows, it can continue to add an almost endless number of users as needed and the majority of hosted exchange plans even offer discounts to companies once they reach a certain size (typically around 50 users). With an internally hosted exchange server, there is only so much the user can do to upgrade it for a heavier workload. Even if this is done as cost effective and efficiently as possible, there will come a time when it needs to be replaced due to business needs or outdated hardware. “Future-proofing” by buying more server than the business needs is no longer an issue with a cloud hosted exchange server.

2. At first glance (or after looking at some advertisements and hosting company provided cost comparisons), the cloud hosted exchange option seems almost too good to be true. Many of these firms such as Intermedia, Rackspace and Microsoft do an excellent job of removing the burden of responsibility from the customer and granting them the desired features at a reasonable cost. While the cloud options made possible by advancing technology are exciting, they are not for everyone. By outsourcing responsibility for these functions, the business customer is also giving up things like control, customization and speed, security.
Let’s start by examining the control issue. With an internally hosted exchange server, the user has complete control of the server configuration. This can be very useful for companies trying to perform specialized tasks related to their business. Having an internal server also allows the company to control exactly where and how data is stored as well as who has access to it. This is not so for outside services. Some hosting services, such as Google’s, tell customers that it may even take up to an hour for information to appear in logs. With cloud hosted exchange servers the business does not truly control its own IP address. Instead, it is shared with other users. To illustrate how this could be a problem, we will use blacklisting as an example. Imagine that you are sharing an IP address with a user who has chosen to spam other peoples’ mailboxes. In response, other mail providers choose to block this IP address in order to prevent the spam from getting through. Now imagine that a user attempts to send a message to a client who uses one of these mail providers. The message would not get through and the user may or may not ever be notified. Now granted, the companies providing hosted exchange do monitor these types of things and typically get them fixed in a relatively timely manner but even a few hours of missed messages can be aggravating at least and costly at worst.
The consequences of internet service outages also vary greatly between these two options. Companies typically can’t control internet service outages but with an internal server at least an outage doesn’t completely cripple productivity. This option would still facilitate internal company communication and has the added benefit of using a much smaller percentage of bandwidth for checking emails in normal conditions. Intra-company messages and data can be delivered seemingly instantaneously when compared to the process of sending it to an outside network only to have it be returned by the externally hosted exchange server.
Another aspect of the internal v. hosted exchange debate revolves around security concerns. Electing to have an outside firm host your server in the cloud outsources both cyber and physical security. While most people are used to outsourcing cyber security via anti-virus software, the physical aspect should not be overlooked. With an internal server, it is easy to determine who exactly has access to your data and who should be accountable if something were to happen. With hosted exchange it is often difficult to even determine where your data is stored much less who has access. In addition to this, there is also (an admittedly unquantifiable) concern that sharing server space by way of cloud hosted exchange would open up the business to a greater chance of being subjected to cyber-attacks as this larger shared server becomes a juicier target for hackers, data

3. thieves, etc. There are certain pros and cons to both choices but server security is something that should be closely examined based on the needs of the business.
Now that we have framed the discussion around the comparative advantages of internal hosting versus hosted exchange, the last aspect to consider is cost. One of the major advantages of cloud hosted exchange is that your future costs are known and any changes to your plan can be easily quantified. Below is a table comparing some of the basic costs of internally hosted servers vs. some of the major players in the hosted exchange market. Internal prices have been rounded up to account for software bundles, discounts, geographic differences, etc. The server configurations are upgraded versions of the stock models to allow for better expandability in terms of the number of users they can support. The price of Windows Server 2012 has also been included under Server Costs as it can be bundled cheaper with a server purchase.
At first glance it may seem like based on the costs of each of the internal v. hosted exchange options that the cloud option is the most economical. This may very well turn out to be the case but keep in mind that these are the most basic plans offered by these companies. The full featured plans are more expensive and may still not be suitable for more complex or specialized business needs. Even the most basic of the servers mentioned in the article offer a much greater set of uses and functionality than the hosted plans.
This article is merely intended to serve as a basic framework for considering the options for a small to medium sized business. It is important to consider all of your business needs when making this type of decision.
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