Microsoft and Google fight over email, but agree on $5 inboxes

The total cost is actually about $10 per user, but that's still cheaper than on-premise email by $3 to $7

When it comes to cloud-based email, there are four major vendors vying for your IT dollars: Microsoft, Google, IBM, and Cisco Systems. Each has its pros and cons, but no matter which vendor you choose the price of email will be roughly the same: $5 per user per month.

Google singlehandedly "repriced the business email market" when it launched Google Apps Premier Edition in February 2007, with $50 annual subscriptions (or $4.17 monthly) that "undercut the market price for email by a factor of two or three," says a new report by Forrester Research analyst Ted Schadler.

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Google Apps vs. Microsoft Office

Microsoft followed suit in late 2009 by lowering the price of hosted Exchange seats from $10 to $5 per month. IBM's LotusLive email and Cisco's WebEx mail now offer similar pricing, in effect standardizing the whole market on price at about $5 per mailbox per month, with typically about 25GB of storage. "Cloud email vendors have reached price parity," Schadler writes in the report "Four Giants Compete for your Cloud Business." A 50 percent reduction in the price of email in a short period of time is "just astounding," Schadler said in a recent interview.

Microsoft and Google are in the lead for customers, but they're not the only contenders, he continues in his report. "Where email was once a sleepy market for Microsoft, IBM, Novell, and a long tail of alternatives, it is now a tumultuous battleground for the big four collaboration vendors: Cisco, Google, IBM, and Microsoft," Schadler writes.

Cisco is the newest entrant in the market, but is already pushing the envelope on price with BlackBerry support for $1 per month, "a huge price drop for a market used to paying $7 to $10 per user per month for a full BlackBerry Enterprise Server license," Schadler writes.

Each vendor has its strengths. Google's Gmail integrates with Google's collaboration tools like Sites, Docs, Talk and Video, and Google is using HTML5 to provide offline email access, Schadler writes. IBM offers tiered levels of services, with email costing either $3 or $5. Microsoft goes even lower with a $2 "deskless worker" Webmail service, and it has the advantage of integrating cloud services with Outlook and other software that business users are already familiar with.

That doesn't mean cloud email will automatically be less expensive than an on-premise deployment, but in most cases the cloud will be cheaper. Forrester analysts began a new effort to analyze the email market in 2008 and were surprised to learn "that nobody seemed to know how much they were actually spending on email," Schadler writes.

Forrester devised an email cost model that examines hardware, software, maintenance, upgrades, staff, storage, email filtering, mobile, financing, and power costs.

While inboxes may cost just $5, the total cost of cloud email, according to Forrester, is $11.33 per user per month for a 15,000-person company and $9.45 for a 45,000-person company. This is significantly less expensive than the cost of on-premise email, which runs to $17.83 per user per month for 15,000-person companies, and $13.32 for 45,000-person companies. (These calculations do not include email archiving and smartphone support).

"Unless you're a 50,000-person company with a highly centralized email platform or you run hardware and software until it's old and crusty and a decade behind the times, you will find email in the cloud cheaper than email on-premises," Schadler writes. "And it always will be. Even advances in storage techniques and declining license costs won't make on-premises email cheaper than cloud email."

Price isn't the only consideration, of course. IT professionals in many cases are still wary of moving mission-critical applications such as email outside their firewalls because of security concerns, and have complained about limited functionality in cloud-based tools.

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This story, "Microsoft and Google fight over email, but agree on $5 inboxes" was originally published by Network World.