The True Cost of Hosted E-Mail Solutions

September 19, 2010

Most businesses take e-mail as a given. However, the true costs of managing e-mail accounts are seldom assessed. As an illustration of the costs, assume a Small to Mid-Sized Business (SMB) with 1000 e-mail boxes for non-IT users, four servers to service the accounts and Microsoft Exchange Platform. Further assume that the IT group gets about 3000 requests on the average annually.  Requests include account set up, password reset, backup, & restore, synchronizing the e-mails with PDAs such as iPhone and Blackberry, and other support.   To properly support the users, two skill sets are required:  helpdesk support and exchange administration.  If the SMB maintains the expertise in-house, hosting costs, staff, virus and spam filtering and Exchange license costs are in the neighborhood of $300,000 to $400,000. It effectively amounts to $350 per user per year.  There are essentially two options:

Option 1:  Outsourcing to a hosted e-mail solution and maintain the helpdesk in-house.

Option 2:  Outsource to a hosted solution and outsource the helpdesk.

Option 1 Analysis:  Typical costs of hosted e-mail solutions range from $10 to $20 per mail-box per month.  If you add a minimum of two support personnel, the costs are not significantly different from in-house costs.  However, the service levels are significantly better.

Option 2 Analysis:  The challenge here is that outsourcing helpdesk for low volume of requests actually results in higher costs.  The primary reason is that most firms providing outsourced helpdesk charge between $25 to $60 per ticket or $30 per user per month.

For this reason, most SMBs have just managed e-mail in-house.  There is an alternative solution.  It takes advantage of the Global blended model more typical of applications outsourcing.  The solution is not to use hosted e-mail, but use hosted servers and use RIM (Remote Infrastructure Management) to manage the servers and off-shore helpdesk.   Although one individual typically is required on-site, the overall costs are significantly lower.  Many off-shore companies now offer a per ticket charge.   These costs are usually in the neighborhood of $4 to $10 per ticket.  Remote infrastructure management is typically $100 per server per month.   This implies that SMBs can reduce their costs by over 40% annually.   The best part is that the service levels are significantly higher than traditional e-mail hosting solutions.  Most Fortune-1000 companies have taken advantage of these benefits.  The growth of focused niche Service Providers will pave the way for SMBs to take advantage of the blended global sourcing models.   The challenge is to find the right Service Provider.  Brokers who connect SMBs to Pre-credentialed Service Providers accelerate the search and contracting process.

Notes:

Industry analysts have identified Self-Service as an area of high return on investment derived from reduced cost per incident, enhanced agent utilization rates and customer satisfaction improvements.

Case in point the average fully-burdened cost per incident:

  • Walk Up            $29.30
  • Phone               $27.60
  • Email                $21.67
  • Fax                   $18.90
  • Chat/IM             $17.90
  • Self-Service       $13.50

* Help Desk Institute, Practices and Salary Survey

Research indicates that agent efficiency in a typical call center is 75% – not an acceptable level in tight economic times.

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