When is Hosted Exchange
Right for Your Firm?
Accellis Technology Group
www.accellis.com
A lot of law firms outsource their Microsoft Exchange Server to a third-party provider instead of
purchasing a server and hosting Microsoft Exchange internally. The advantages are that the third-party
absorbs the cost of hardware (server), software (Microsoft Exchange), and management (updates,
backup, etc.), and leaves the law firm with just a monthly investment of $10-$25 per month per user,
depending on who the provider is and how much storage / add-ons you elect to have. For some firms,
however, this isn’t the most cost-effective route, and there are significant advantages of hosting
Exchange internally.
What is Microsoft Exchange Server?
Microsoft Exchange Server actually isn’t an actual “server” but rather a software application you can
purchase to host your own email account using a domain name of your choice (you must pay for your
domain of course), such as @ABCLaw.com instead of @Yahoo.com. Here on, we’ll simply refer to it as
“Exchange”. You have two options when it comes to Exchange – buy the software yourself, put it on your
server, and host your mail in-house, or you can pay a third-party to do those things offsite as a monthly
service.
Why outsource the hosting of company email anyway?
A lot of upstart law firms start with just one person and no server. Accordingly, in order to get an email
address like @SmithLaw.com instead of @AOL.com, which lends them much needed credibility, they
outsource Exchange hosting to a third-party instead of purchasing the software & server needed to host it
internally, which reduces out of pocket costs. As the firm grows the simplicity and scalability of adding $15
per month each time they need a new mailbox is straight forward and low-cost. But, as growth continues,
the firm eventually needs to buy a server to run other software that is needed to manage and streamline
operations (i.e., practice management software). It’s at this point that small firms should start looking at
the cost of owning Exchange, as they can combo the use of their server to do both mail and other basic
applications. For large firms, a dedicated mail server will be needed, so you can begin looking at any
time.
What does it cost for outsourced Exchange hosting?
For the purposes of my comparison, let’s narrow down to one specific provider – MailProtector – which
offers three options to choose from:
1. Advanced – 250MB storage – $12 per user per month
2. Premium – 1GB storage – $15 per user per month
3. Exchange – unlimited storage – $26 per user per month
When is Hosted Exchange Right for Your Firm?
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What prerequisites are there prior to purchasing Exchange?
The prerequisite to purchasing Exchange is purchasing a server – you need a box to host this software
after all. Servers are about $3,000 on the low-end in hardware costs; setup for the box is usually another
$2,000, so you’re about $5,000 all in. If you’re looking to buy your first server specifically to just bring mail
in-house, be prepared to spend more money than if you had just outsourced. If, however, you use this
box for other things such as files & legal software, and not solely for mail, then there really isn’t any added
cost because you both have and need a server anyway; that said, the larger your firm, the more likely that
you will need a dedicated server (which adds to your cost) in order to appropriately handle the both the
Exchange resource consumption and other resource-consumers like SQL databases.
What does it cost to bring Exchange in-house?
Here are some of the specific costs associated with bringing Exchange in-house (other than what it costs
to buy, install, and manage a dedicated server):
1. Software cost to purchase Exchange: If you are purchasing a new server, just buy a Small
Business Server (SBS), which comes with Exchange at an added cost of only $400 which
includes five mailboxes; if you own a non-SBS and want to add it to your existing server, think
about $700 apples-to-apples.
2. Software costs for backup software agent to ensure Exchange is in the backup
scheme: First of all, you need backup software if you own a server anyway, so this isn’t an
added cost to your firm just because you want to bring Exchange in-house; the added cost is
software licensing for the Exchange agent, which is pretty much an extension of the existing
software that ensures Exchange is included in your backup scheme. If you own Symantec
BackupExec and want to add the Exchange agent, think it’ll cost about $500 unless you
bundle upfront, which will result in cost savings.
3. IT management & service costs for installing the software and setting it up: Think about
paying your tech company or tech guy/gal about $100 per user for setup; this includes
installing the software, tying it to the domain name you own, and configuring all the mailboxes
& individual / group settings.
4. Monthly IT management & services needed to maintain the account: Assume that you’ll
need about a half-hour to an hour per month in services from your tech company to manage,
maintain, and back up Exchange; so about $50-$100 per month.
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What’s riskier for my firm – outsourced or internal Exchange hosting?
It’s not an easy question to answer because there are a large number of variables.
1. Theft: large companies are targeted more frequently by hackers and such because, once
penetrated, they have more stuff that can be stolen, giving the hackers better bang-for-thebuck. That said, larger companies have enterprise-grade security, including hardware and
software solutions, whereas your small firm might have just software solutions and
“password” passwords.
2. Failures: whoever owns the Exchange software owns the risk associated with hardware and
software failure, troubleshooting, and repair; if your provider is down it’s costing them, not
you, whereas if your mail server is down you’re absorbing those costs. Accordingly, if you
own Exchange, be proactive instead of reactive and prevent issues instead of reacting to
them.
3. Uptime: a hosted solution gives you risk in that if they are down, you are down, and there’s
no way around this. Sure you can call Ethiopia and talk to “The Manager”, but you’re not
getting access to email any faster because you told them your hearing is in one hour. You’re
stuck just like everyone else. Most of these services promise 99% uptime, but, while I admire
their enthusiasm, I’m still skeptical. That said, it’s a two way street; if you don’t properly
manage and maintain your server and Exchange account, then you’ll cause your own
downtime and be the person holding the bill once it’s fixed.
4. Internet / Power: in a hosted arrangement, if you lose power or Internet, you’re down –
period. Most likely you’ll have access to your phone which uses an alternative source of
internet (like 3G) but this is hardly ideal, especially for email-intensive attorneys.
5. Cloud Conundrum: you still deal with the whole cloud conundrum if you outsource to a thirdparty – who owns my emails, me or them? Who is liable if emails and / or personally
identifiable information (PII) are stolen, me or them? Am I violating Bar Association / ethics
standards with offsite storage? If Exchange (and all the associated emails) are onsite,
problem solved.
6. Systems Integrations: owning your own Exchange allows you to integrate it with other legalapplications, such as Time Matters for practice management. This integration is very
important for firms looking to stream calendar, to-do, and contact information directly to
mobile phones & tablets. A third-party that hosts Exchange “in the cloud” can’t always provide
direct integrations with your applications, which are run locally on your desktop or server.
Accordingly, if you need integrations between local systems, you’ll usually want Exchange to
be on your server.
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Can you give me an example for a small law firm?
Say we’re looking at a 5-user firm who is replacing their server with a SBS machine so they can bring
Exchange in-house. The current cost of their hosted Exchange service is $25 per person, per month; this
means their total three, four and five year costs are $4,500, $6,000, and $7,500, respectively.
The cost for a SBS machine over a Server 2008 machine (one without Exchange) is an extra $400. Then
they need the MS Exchange agent for BackupExec, which is the software they use for their backups; it
just so happens that when you purchase BackupExec for SBS, you save $400 on the total cost of
BackupExec by bundling, so this negates the extra $400 they spent on getting Exchange, putting their
total added cost at $0. Say then that they pay their services provider $500 to get each user set up, and
then finally assume that each full year of mail server management costs about $600. This means that the
five year cost of owning their own Exchange is: ($400) - ($400) + ($500) + ($600)*No. of Years = $X.XX;
the three, four and five year costs for bringing Exchange in-house are: $2,300, $2,900 and $3,500,
respectively. These are significant savings.
What about small firms that don’t have a server but want to host
Exchange internally?
It’s more difficult to make the numbers work in this instance because the cost for a dedicated server is
about $5,000, meaning the same $2,300, $2,900, and $3,500 figures all go up by $5,000, making hosted
Exchange the better value. Thus, if driven solely by cost, the best value for this firm is to maintain their
existing outsourced arrangement.
What about larger firms?
Larger firms will usually need a dedicated mail server in addition to having Exchange and this adds to the
total costs of ownership. That said, larger firms have advantages in scale that lower the lifetime costs per
person, driving value for the firm. Let’s look at a sample cost analysis for a 30 member law firm. Making a
few generalizations, I’ll calculate the cost of the server, Exchange software, maintenance, and
management over five years; this will determine cost per person per month for five years, which we can
use to determine when the firm breaks even and starts earning a return on investment.
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Mail Server vs. Outsourced Exchange for 30 Member Law Firm
Cost Per Person Per Month
Years
As you can see the cost per person is cheaper for outsourced Exchange for the first two years;
somewhere near the middle of year three, however, this reverses and it’s from this point that the longer
the firm keeps the mail server the longer they’ll enjoy valuable cost savings. The total five year cost for a
dedicated mail server for this firm is about $16,000, whereas the total cost for outsourced Exchange for
the same five year period is over $23,000. This is a savings of about 45%.
Final Thoughts
Typically, outsourced Exchange helps smaller firms because the infrastructural and managerial costs
associated with hosting this service internally are too much to swallow as a percentage of total revenue.
That said, larger firms typically benefit from the opposite because they have a much larger pool of
employees (revenue-generators) from which they can evenly distribute costs over a period of years.
Generally speaking, the larger the firm (50 members, 100 member, 150 members) the greater the perperson cost savings are; as the number of members decreases the cost per person increases, making
this option less & less attractive.
Just remember that every single situation (5 users or 500 users) is different and that it might not always
be more cost-effective for your firm to bring Exchange in-house just because you have a certain number
of employees. We recommend contacting a legal-specific consultant or MSP who can study your
environment, go over the numbers with you, and determine if the move can save you money.
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Accellis Technology Group
Founded in 2001, Accellis Technology Group is a recognized leader in providing high-impact technology
solutions for law firms across the country. We’ve built an extensive reputation within the legal industry for
providing law firms with professional, knowledgeable and capable resources. With the experience of
consulting for hundreds of legal clients, we have an understanding of the 'best-in-practice' solutions that
ensure our clients will get the most out of their technology investment.
Accellis Technology Group, Inc.
Cleveland | Pittsburgh
Phone: 216.662.3200
Email: [email protected]
Website: www.accellis.com
© Copyright 2012, Accellis Technology Group.
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