Microsoft should do this: Exchange plus Hotmail

One of the reasons cited (by Cap Gemini, for example) for investigating Google Apps for Enterprise as an alternative to Microsoft Office is the cost of rolling out Exchange email to every worker in an organization. Employees who only need email accounts occasionally, for example to correspond with the HR department, don't justify the overhead of an Exchange account, so a low-cost webmail service is an attractive option (though not if it stops working).

This is a competitive threat that Microsoft could neutralize straight away if it offered enterprises a way to provision and manage accounts on its Hotmail service as part of an enterprise Exchange implementation. Of course the corporate version would have to lose some of the more consumer-y aspects of Hotmail, but that's very easy to do. I'm surprised it's never discussed, especially since it's the kind of bold move that would put some much-needed oomph into Microsoft's flagging 'software-plus-services' strategy.

Instead, it's been left to one of the myriad small providers of hosted Exchange and webmail to put such a solution together — Exchange plus a low-cost webmail service, managed from a single administration console. The service launches this morning from Mailtrust, which was known as Webmail.us until a name change following its acquisition last September by hosting provider Rackspace [disclosure: Rackspace recently comped me an account on its Mosso cloud hosting service, although I haven't yet had a chance to set aside time to start using the service].

Unlike many hosted email providers, Mailtrust specializes in catering to businesses rather than individuals, and all of the 800,000+ mailboxes it hosts are paid for. Of that total, 40,000 are hosted on Exchange at a starting price of $14.95 per user per month, while the reminder are hosted on Noteworthy, the provider's own homegrown business webmail service, with a starting price of $3 per user per month (and a minimum 10 users per account). Prices are discounted for larger numbers of users.

The integrated control panel is scheduled to be available from today for new customers, and will be rolled out to existing accounts over the next few weeks. In a briefing last week, Pat Matthews, Mailtrust's president and CEO, said the integrated solution could save a typical customer thousands of dollars a year in hosting charges. As an illustration, he cited a customer with 100 mailboxes where 20 stay on Exchange while the rest move to the lower cost Noteworthy service. Instead of paying $18,000 a year to host all 100 staff on Exchange at $15 each per month, moving 80 of them to the $3-per-month Noteworthy rate would slice the total annual bill by almost two thirds, to below $6,500.

"We already have more than 400 customers utilizing both services across a single domain," said Matthews. "A lot of customers want to stay on Exchange but not for everyone in the business. We're launching a blended solution where customers can keep Exchange but save a lot of money."

Noteworthy offers a "scaled-down" set of Exchange-like features, including IMAP4, contact lists and a company directory, tasks and shared calendaring, with synchronization to Blackberry and mobile POP/IMAP access. Unlike other webmail accounts, which often have a 10MB ceiling on attachments, Mailtrust allows attachments up to 50MB. Mailbox capacity per user is 10GB. Backups are held for 14 days in three separate data centers, including Amazon S3, with archiving to DVD as an optional extra.

Matthews claims Mailtrust is the first provider to offer Exchange plus webmail as an integrated service, and I'm not aware of any others. Although many providers offer webmail as well as Exchange, Microsoft is encouraging its bigger partners such as Apptix and USA.net to move upmarket into Sharepoint hosting — while Microsoft itself readies its own vanilla hosting services. "I don't necessarily see us going one hundred percent down the Microsoft path," said Matthews "— especially when we see Microsoft competing with its partners."

Meanwhile, webmail-only providers are set to lose out against deep-pocketed competition from the likes of Google and Yahoo! But many businesses will still want to keep using Exchange for a subset of its users. "We believe Exchange is not going away anytime soon," Matthews told me. "For a long time to come, hosted Exchange is going to have a market." By pitching a service that straddles both webmail and Exchange, Matthews believes Mailtrust is adopting a more defensible competitive position. "If you're not going to differentiate, I think Microsoft and Google are going end up eating your lunch," he told me.