Cloud-based e-mail is cheap, but Google is cheapest

A new Forrester report detailed by ReadWriteWeb contains some interesting data for enterprises considering cloud-based applications. The first finding, that cloud-based e-mail is always cheaper than on-premises solutions for smaller companies with fewer than 15,000 users, may not be that much of a head-turner. Small companies have always been touted as the best candidates for SaaS, since they seldom have the inhouse staffing or expertise to support services themselves. But the big news is that Google Apps is always the cheapest e-mail option, even in organizations with as many as 55,000 users.

The report looked at the cost per user per month to support on-premises e-mail and cloud-based e-mail, and specifically looked at the costs of Microsoft Exchange Online and Google Apps in the cloud realm. It considered costs such as subscription, server and hardware OS, server software, client software, storage, message filtering, message archiving and staffing. In the end, Forrester says, a 15,000-user firm would pay $25.18 per user per month for an on-premises solution, while the same firm opting for a cloud-based vendor would pay just $25.08. But if that same company were to consider Microsoft Exchange Online, the cost would go down to just $20.32 per user per month (probably due to economies of scale). And if it were to opt for Google Apps, the total cost would be ... wait for it....just $8.47 per user per month. So while most cloud vendors are priced to break even with the cost of on-premises software, Google costs far less than all other solutions.

That's good news for small companies, but Google's price advantage becomes even more apparent as enterprises scale up in size:

Cloud e-mail pricing


While Google's price advantage dips somewhat as enterprise size increases, to just half the price of an on-premises solution vs. a third, it's also far cheaper than other cloud-based services, including Microsoft Online Exchange. And Forrester says it believes that Google can make money, even at that price, due to Google's use of "automation and massive scale to achieve an order of magnitude lower cost of service than a typical enterprise."

Enterprises need to consider a wealth of factors--beyond price--when determining the right e-mail solution, including feature set, support and proper service levels. As Forrester says, Google still needs better mobile support, an offline e-mail and calendar client, and a clearer product roadmap. But Google is supposedly working on all that, with Gears support for Gmail and Calendar expected soon and recent promise to roll out new features sans price jump. And price is bound to become a larger factor in the enterprise decision as the economy remains bleak.

What do you think? Do you think Google's price advantage will be enough to sway the enterprise toward its cloud?

Copyright © 2009 IDG Communications, Inc.

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