Busting the myths of Email outsourcing

Summary:When you pay that outsourcing firm one and a half times $150 per hour for night and weekend work, understand that the people who actually do the work during their usual off hours get zero, zilch, nada and the outsourcing firm pockets the money. This is the dirty little secret in outsourcing firms make a killing in profits and the losers are the workers and the clients.

When David Berlind suggested that 90 percent of businesses can't justify insourcing their Email and therefore should outsource their Email instead, it kicked of a firestorm of debate inside and outside of our ZDNet blogsphere when JMJames who recently started blogging for our sister site TechRepublic.com took David to task. Our own Phil Wainewright compared running an Email server in-house to doing your banking in-house and concluded that "most people in favor of keeping Email in-house are simply prejudiced".  Our own Dion Hinchcliffe suggested that running an in-house Email system is the same as running your own in-house electric power plant.  Speaking as someone who actually builds Email servers, I'm going to have to bust some of these myths.

Email server equals Power Plant or Bank:
I don't know how anyone can even make this comparison in the first place.  An Email server is $5,000 while a Power Plant large enough to run a 100 person business probably costs $250,000 not including installation and diesel delivery.  Most businesses do run their own Email servers while extremely few businesses run their own in-house banking.  If anyone actually believes that these things somehow equate to each other, then you're a salesman's best friend and I'd like to sell you some ocean front property in Nevada.

Only prejudiced people are against outsourcing:
Phil Wainewright suggested that people who are for running Email servers in-house are "prejudiced".  The fact of the matter is both JMJames and I work for IT outsourcing firms that make lots of money selling outsourced Email services.  If we were "prejudiced", it would be in favor of outsourced Email.  The truth of the matter is, I would love for you to outsource all your Email services to me because it is a very lucrative business and I would start my own business tomorrow if I had more than a few hundred users willing to sign up.  I would make more money in a single month than if simply had offered my consulting services to build an Exchange server for you.

Insourcing doesn't account for overtime:
Phil Wainewright suggested that insourcing doesn't account for staff overtime.  Hearing this from an outsourcing proponent had me rolling on the ground laughing.  I think it's time that I let every one in on a little secret.  Only businesses that outsource their IT work pay overtime and companies that insource IT work usually pay nothing for nights and weekends because their staff is usually on salary.  When you pay that outsourcing firm one and a half times $150 per hour for night and weekend work, understand that the people who actually do the work during their usual off hours get zero, zilch, nada and the outsourcing firm pockets the money.  This is the dirty little secret in outsourcing where firms make a killing in profits and the losers are the workers and the clients.

Insourcing doesn't account for monitoring:
Phil Wainewright suggested that insourcing doesn't account for service monitoring.  I say you don't have to because any business has to have their own monitoring system anyways to monitor their servers, routers, switches, and firewalls.  Lots of businesses I know of rely on a cheap and simple combination of Whatsup and Solarwinds or MRTG.  Even if you did outsource something like CRM to Salesforce.com, would you really trust Salesforce.com to do your monitoring for you when they wouldn't even admit they had some severe outages?  Even though Salesforce.com started a new website to report uptime, it still makes good sense to verify.

In-housed Email results in smaller mailboxes:
Dion Hinchcliffe says that in-housed means smaller mail boxes, but I say nonsense.  Hard drives (and hardware in general) are the cheapest aspects of IT.  Outsourcing proponents like Sun wants you to think of storage as electricity.  Sun would have you believe that it's better to pay $300 per month for 300 GB of storage rather than buy 300 GBs of redundant RAID storage for a one time fee of $300 plus a few dollars per month in electricity.

In-housed Email results in less accessibility:
Dion Hinchcliffe says that in-housed means less accessibility.  I'm wondering if Dion has ever built an Email server and what makes him think that an in-house Email server is any different from an off-site server (I almost wanted to say out-house server because it would probably be an accurate description of the performance of an off-site Exchange server).  Microsoft Exchange 2003 has Outlook anywhere capability where Outlook 2003 just connects to Exchange without any VPN service and it can bypass just about any firewall or proxy restrictions.  Exchange 2003 SP2 added significant enhancements for mobile devices like Palm and Windows Mobile.  While there are bad IT departments that refuse to adopt technological progress, forward thinking IT departments will jump to implement these features.  If a business is faced with an IT department that refuses to adopt technological advancements to improve productivity, then it's probably time for the IT leadership to make some staffing changes or it's time for the business to consider new IT leadership.

Speaking of accessibility, one thing that the outsourcing proponents will NEVER mention is the speed of the server.  Anyone who's ever tried to use an Exchange server who deals with large attachments via an Internet connection would tell you that the experience stinks.  Forcing 20 or more people to use a remote Exchange server is just dumb.  No off-site server can compare to the performance of a cheap gigabit server on the LAN. 

The issue of server uptime:
Dion Hinchcliffe says that in-housed means less Email uptime.  As someone who designs Email systems, I can tell you that keeping an Email server running isn't rocket science.  Microsoft Exchange 2003 is almost zero management since user management is mostly done from the Active Directory and all it really needs is an occasional patching and some database maintenance.  Outsourced firms can easily manage a hundred Exchange servers with a few Exchange administrators that rotate shifts.  You can have as much uptime as you want but it will cost a lot less to run in-house.

In-house Email servers cost more:
All the outsourcing experts say in-house Email cost too much.  As someone who built these systems for a living, I can authoritatively tell you that it isn't true.  An Exchange server for 100 people shouldn't cost more than $6000 in hardware and that's for 3 dual-core servers which include 600 GBs RAID storage plus $10,000 in server and client licenses but the hardware and software costs can be spread across 4 years.  As for the costs of labor, it should be minimal.  For a small business with less than 100 people, the administrator who runs the Windows servers probably runs the Exchange server as well.  At most, an Exchange expert might have to be brought in to design and build the system, but it really doesn't take much to do routine administration.

When factoring wages in the decision to outsource or not, a business has to ask itself if it actually intends to lay people off in the event that they do decide to outsource.  The fact is that an IT person probably spends less than 10 percent of his time managing an Exchange server so it's highly unlikely that a business will save on head count.  If they can save on head count, there were staffing inefficiencies in the first place that could be addressed without resorting to the outsourcing of Email.  In the case of a really small business with less than 20 people, there are plenty of companies that will provide cheap remote management of an in-house small business server.  When you consider all the alternatives, it just doesn't make any sense to pay $45 per user per month for a severely bandwidth-constrained off-site Email server.

Topics: Servers

About

George Ou, a former ZDNet blogger, is an IT consultant specializing in Servers, Microsoft, Cisco, Switches, Routers, Firewalls, IDS, VPN, Wireless LAN, Security, and IT infrastructure and architecture.

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