Service Provider News Report

Network World's Service Provider News Report Newsletter, 04/25/07

Managed messaging services on the rise

By Carolyn Duffy Marsan

Providers of hosted messaging services are reporting double-digit growth, as more companies – large and small – are outsourcing management of their e-mail systems.

E-mail is a major frustration for CIOs, which is one reason they are more willing to outsource e-mail systems to a reliable service provider, says Michael Riegel, director of managed services for IBM Global Services.

"Studies have found that as much as 70% of a company’s intellectual property is in the e-mail system," Riegel says. "Because it’s mission critical, it requires more uptime, it requires more storage, and it requires greater security. It’s these three new layers of complexity that have come into play that are frustrating clients."

The hosted e-mail market, including corporate and consumer mailboxes, will double over the next four years, reaching 2 billion mailboxes by 2010, according to The Radicati Group.

Although small to midsized businesses are the primary customers for hosted e-mail services, more enterprises are outsourcing e-mail because it is getting increasingly complex with antivirus, antispam and mobile requirements.

Service providers likely to benefit from the trend include IBM, Verizon Business and HP. These service providers offer hosted Microsoft Exchange, IBM Lotus Notes and generic SMTP platforms.

"The managed business e-mail provider market will grow an average annual rate of 10% over the next four years," The Radicati Group said. "Companies typically purchase managed business e-mail services along with a host of other IT management/outsourcing services."

For example, Verizon Business says its customer base for hosted messaging services grew more than 30% between January 2006 and January 2007.

"The adoption of outsourced e-mail is moving beyond small and midsized businesses," says Patrick Verhoeven, group manager for IT Solutions at Verizon Business. "We’re seeing large enterprises being comfortable outsourcing e-mail, not just in North America but in Europe, India and Asia. We have a customer with 10,000 seats in the United Kingdom. We have a customer with 10,000 seats in Scandinavia. We have 12 large customers in the Asia Pacific region."

Enterprises are interested in outsourcing e-mail because managing Exchange servers, battling spam, viruses and phishing attacks and supporting wireless devices such as Blackberries is difficult.

"This is a good solution for any industry that is decentralized in nature, such as retail, hotels or car dealerships," Verhoeven says.

Verizon Business offers hosted Microsoft Exchange services that are integrated with Microsoft Active Directory and security services from Trend Micro and Symantec and wireless services from RIM. These services cost anywhere from $6.95 to $12.95 per seat, per month.

One customer of Verizon Business’ hosted e-mail services is Internet Securities, an aggregator of business and market analysis information that has 300 employees in 26 offices worldwide.

Antonio Monteiro, CIO of Internet Securities, says he decided to outsource e-mail services to Verizon Business two years ago because it was getting too complex for his internal IT staff to manage.

"We needed to upgrade our e-mail service to the enterprise to provide connectivity to mobile devices, and we had security concerns," Monteiro says. "It became apparent that our internal systems team could not support 7/24 enterprise e-mail systems like Exchange, nor did we have the bandwidth to implement a project like this."

Monteiro estimates that Internet Securities saves between $20,000 and $30,000 a year by outsourcing e-mail to Verizon Business. He says the company also benefits by having a state-of-the-art Exchange e-mail system, a solid disaster recovery plan and malicious e-mail removed from its production networks.

Monteiro recommends other CIOs look carefully before choosing a hosted e-mail provider.

"Not all vendors have the same add-ons, and you might find yourself nickled and dimed to death," he says. "Also, look carefully at vendors’ ability to supply API interfaces like LDAP if you have internal systems such as CRM that need to communicate with your e-mail system."

On the horizon for Verizon Business is the integration of voice into its hosted messaging and instant messaging services.

"Our goal in 2007 is to tie the existing capabilities together for unified IP-based communications," Verhoeven says. "This will include messaging integrated with conferencing and voice."

Carolyn Duffy Marsan is a senior editor with Network World and covers emerging Internet technologies and standards. Reach her at cmarsan@nww.com

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