Microsoft ups ante with Exchange 2007

Software giant's messaging tool touts unified communications and data management, which will pose a threat to IBM, analyst says.

NEW YORK--Microsoft will present a new competitive threat to IBM with its new versions of Exchange and SharePoint, according to an analyst.

According to Peter O'Kelly, research director at analyst company Burton Group, the cocktail of Microsoft's Exchange 2007 and SharePoint Server 2007 will present "unprecedented competition" to IBM in messaging and collaboration software. He was speaking to ZDNet Asia on the sidelines of a press briefing, held Wednesday--a day before Microsoft launches Windows Vista, Office 2007 and Exchange 2007 for business customers on Nov. 30.

O'Kelly said: "Microsoft has never had the combination of very strong enterprise messaging and collaboration software before. So, I think Microsoft is going to be a new competitive threat to IBM."

He noted that Microsoft has historically been strong in enterprise messaging, but not in collaboration. "[Exchange] hasn't really approached what you could do with Lotus Notes, which is a combination of enterprise messaging and document-oriented workflow."

But with SharePoint 2007, Microsoft is "getting a lot more credible" for enterprise content and workflow management as well as search, he noted.

According to a Gartner report released in September, the analyst company said Exchange 2007 could "set the future for e-mail". Apart from its traditional role as a mail server, Exchange 2007 also includes unified communications functionalities that tout voicemail integration, as well as antivirus, archival, compliance and disaster recovery capabilities.

Unifying communications
"Communications is not just about messaging and voice," David Thompson, corporate vice president for Exchange at Microsoft told reporters Wednesday.

"It is about unifying different forms of communications, so you can choose the mode of communication depending on where you are and what you want to do," Thompson said.

According to Microsoft, Exchange Standard Server will cost US$699 while Exchange Enterprise Server will be priced at US$3,999.

As for client access licenses (CAL), Microsoft said customers can choose to purchase either the new Exchange Enterprise client CAL or the Exchange Standard CAL, depending on their needs. The CAL fees for Exchange Standard will remain the same as it was for Exchange 2003, at US$67.

Offered as an add-on to the Exchange Standard CAL, the new Exchange Enterprise CAL grants users rights to use unified messaging, journaling, compliance, antispam and antivirus. Costing an additional US$36, it will include Software Assurance agreement fees, Microsoft said, adding that the prices are estimates only, and may vary according to the customer's requirements.

The pricing details effectively debunked what Gartner had noted in its report, stating that the cost of the Exchange Enterprise CAL is expected to be twice the cost of a standard CAL.

O'Kelly said Microsoft dominates the market in enterprise messaging, while IBM is stronger in real-time communication and collaboration because Big Blue "started earlier and had products out there for a long time".

Commenting on customer migrations to either platforms, the Burton Group analyst said: "This is a fairly mature market segment. In many cases, migrations are the result of a mergers and acquisitions, where one company uses IBM Lotus Notes and the other is using Microsoft Exchange.

"I see examples of migrations going both ways." However, he noted that the tide has been shifting toward Microsoft as more customers have been migrating away from Lotus Notes/Domino to the Exchange platform.

"On balance, Microsoft is winning more than it's losing," O'Kelly said.

New competitors
By integrating unified communications into Exchange 2007, Gartner said Microsoft is also challenging services provided by unified communications specialists such as Avaya and Cisco Systems.

O'Kelly said: "I don't think Microsoft is specifically going out to grab the business of those incumbents. What you are seeing is more of a structural shift, where a lot of communications services can be provided by software."

Because Exchange 2007 will only run on a 64-bit platform, Gartner noted that businesses that migrate from earlier versions of Exchange will have to embrace Windows Server 2003 x64. This might slow down take-up rates as companies will need to validate their readiness to deploy and support Windows Server 2003 x64, the research company said.

But, Microsoft's Thompson is confident that a 64-bit platform will not hinder the adoption of Exchange 2007. "Generally, when businesses replace their mail servers, they also replace their hardware and operating system all at once," he said.

Thompson added: "We were worried about that in the beginning but because 64-bit hardware has been cost-effective for a couple of years now, we're confident it won't be a barrier.

"The benefits are very high in terms of the scalability you can get out of a system like Exchange," he said.

While it remains to be seen if Microsoft will gain traction with Exchange 2007, O'Kelly noted that IBM will not rest on its laurels. "IBM is also seeking to move its product forward," he said. "In January, IBM will have its Lotusphere event where they'll talk about version 8 of Lotus Notes."

Aaron Tan of ZDNet Asia reported from New York, USA.