Trying to decide between a hosted Exchange Server and Microsoft Small Business Server can be a tough decision for a small business.  I will present a case study of a small non-profit with ten computers running Small Business Server 2003 with three iPhones on active sync. They have been using SBS 2003 for four years. What would have their costs/savings been if they went with a hosted Exchange solution? This is an easy study to construct, since I have all the numbers at hand.

In-house installation:  Microsoft Small Business Server 2003 R2, UPS battery backup, anti-virus and spam protection for server, external backup disks and SSL cert: $2,960.
Installation of server and configuring network, workstations and printers: 17 hours at $100 per hour: $1,700.
Total cost of hardware, software and installation: $4,660.
Ongoing maintenance costs (Exchange Server only): $25 per month, or $300 per year.

Hosted Exchange Server 2007 option over the same time period: 10 users with 5 GB mailboxes each, three iPhones and premium spam filtering: $151.oo per month, or $1812.00 per year.

The Small Business Server 2003 solution has a total cost of $5860 over the four years. The Hosted Exchange Solution would have cost $7248 over the same time period, for an extra expense of $1388. Keep in mind that the SBS 2003 ongoing costs of $25 per month are for Exchange related maintenance only, and do not include general server or network issues. This is an important distinction, since most businesses have a server of some sort, and it requires maintenance whether it’s SBS or not.

As one can see, the Hosted Exchange solution is more expensive in this instance. I chose this case because it represents a typical small client with a limited IT budget. The server and associated hardware they bought were obviously not state-of-the-art, but adequate for their needs. The server was installed correctly the first time by yours truly, and it continues to run without problems, needing only monthly security updates for maintenance. A lot of the businesses I work with or talk to have had bad experiences with Small Business Server. When I check out their issues, I find uniformly that the problems they have are due to a faulty server installation. Some of these problems can be rectified inexpensively, while others require blowing up the whole server and starting from scratch at great expense. These are the kinds of issues that drive customers to a hosted solution.

The compelling case for a Hosted Exchange Server is a very small business with less than 10 users and limited finances to purchase and install a server, or a larger small business with 50-75 users, which is the upper limit for Small Business Server. At that point they are looking at a separate Exchange Server install with vastly increased hardware and software licensing costs, along with increased recurring IT costs. Most of the cost comparisons I see on hosted Exchange vendor’s websites are comparing hosted services with a full Exchange implementation and not SBS, which shows the hosting vendor’s prices in a much better light.

When looking at a hosted Exchange solution for your small business, be sure to compare Small Business Server with the hosted Exchange option. The sweet spot for hosted services appears to be either less than 10 users or 50 and up. If your business is between 10 and 40 users and you work with a consultant who knows how to install and configure Small Business Server you will be happy with the results. Microsoft has refined Small Business Server over the years to the point where it really does what it is supposed to do out of the box without high ongoing IT maintenance costs.

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