Cloud-Based E-mail Is a New Tech Battleground

Cloud computing is the hot new buzzword in tech these days. But who knew the killer app for this brave new world would be plain old e-mail? Yet that is exactly what’s happening. “E-mail has become the easiest workload for customers to move to the cloud,” says Chris Capossela, a senior vice president at Microsoft.

What this shift means, basically, is that instead of buying your own computer servers and paying a team of techies to run your e-mail system, you can instead rent e-mail as a service. Microsoft—or Google or IBM—runs your e-mail system on its servers, taking care of security, software updates, and bugs. It’s the first step in a larger shift in which, over the next decade, much of the computing that takes place in corporate data centers will migrate out onto the cloud. As it unfolds, it could create new winners and losers among big tech companies.

Microsoft reckons that the average customer can save 30 percent on e-mail by moving to the cloud. A company with 1,000 employees might spend $2 million a year on e-mail, so the savings are significant. Proponents say cloud-based mail is not just cheaper, it’s also better. With cloud-based mail each user can have huge amounts of storage space—25 gigabytes or more—while a traditional “on-premises” e-mail system might allow users only 100 megabytes.

Rexel, a French distributor of electrical equipment, expects to cut its e-mail costs by one third by moving its employees from a hodgepodge of systems to a single cloud-based one, operated by Microsoft, says Olivier Baldassari, the company’s chief information officer. So far Rexel has shifted 4,000 of its 28,000 employees to a cloud version of Microsoft Exchange and plans to get everyone moved over by the end of 2011.

Microsoft wasn’t the first to offer cloud-based mail to corporate customers: it had to play catch-up with Google. But for companies already using Exchange, it’s often easier to move employees to the cloud version of what they already know than to switch them over to a new system. Serena, a software company in Redwood City, California, last year went from on-premises Exchange to Google’s Gmail but is migrating again, to the cloud-based version of Exchange, mostly because its employees are more familiar with it. “Making the change to Google was gut-wrenching for a lot of people,” says Ron Brister, Serena’s director of IT. “People just weren’t getting used to it.”

Microsoft sees the cloud as a competitive weapon, a chance to pull customers away from rivals like IBM, which sells an on-premises messaging system called Notes. “Customers are using the cloud as a way to move to Microsoft,” Capossela says, citing new customers like GlaxoSmithKline, Coca-Cola, and Kraft Foods. But wait—IBM claims it’s doing the same thing right back to Microsoft. IBM sells a cloud-based mail solution called LotusLive iNotes and has lured away from Microsoft such customers as Panasonic, which is moving 300,000 employees onto an IBM cloud.

One thing Microsoft, Google, and IBM all agree on: the battle over cloud computing is only just beginning. For old-guard tech companies, it offers the chance to add new customers. But it also brings big risks: during big shifts in technology like this one, industry giants can be swept aside as new leaders emerge. Ten years from now, the tech landscape is certain to look very different.