As cloud computing and cloud services become a focal point of many a tech talk today, and we, at Frost & Sullivan, more and more frequently engage in debates over the future of communications apps in the cloud, we chose to take a look at enterprise email and its success in the hosted market to date, as well as its future potential as a cloud service.
Here follows a summary of Subha Rama’s findings in her North American Hosted Enterprise Email Markets study.
The hosted enterprise email market has finally taken off in earnest after several years of uncertainty. In the past, businesses tended to view email as mission-critical and were not comfortable with the email application residing outside the enterprise, hosted in a third-party data center. However, the entry of large cloud-based email service providers such as Google and on-premise vendors such as Microsoft (and more recently IBM) has validated the software as a service (SaaS) model. An increasing number of enterprises are looking at provisioning their email off the cloud to achieve lower costs. The growing cost and complexity of in-house email systems is exerting a lot of pressure on IT resources, forcing businesses to consider alternative deployment options. Despite widespread downsizing of IT budgets in 2008, the hosted email market saw its installed base grow by 20.5 percent to 14.9 million email boxes. Between 2009 and 2015, demand is expected to grow at a CAGR of 18.1 percent to 47.8 million email boxes.
Email is still one of the most critical communication tools available to business users. The technology is by no means new, however, the way email is delivered, stored and managed is evolving fast as various alternatives become available. One of the biggest drivers for this change is cost, closely followed by the growing complexity of email systems.
For smaller deployments, on-premise software translates into higher cost per mailbox as economies of scale are hard to achieve. Moreover, on-premise email platforms are complicated, expensive and demand a fair amount of expertise and investment capabilities. Increasing email sizes and larger storage requirements also result in escalating costs. Email archiving (online backup and recovery), compliance, and security (filtering, spam control etc.) add layers of complexity to the email environment. Compliance issues dictate that organizations archive their email over a period of time, forcing businesses to invest in expensive storage area network (SAN) architectures. Also, businesses need to closely monitor the rapidly evolving virus and spam threats, which is a major cause of distraction from their core business focus.
Over the last few years, there has been a dramatic shift in how end users look at email. It is no longer a standalone messaging platform but a pivot around which a number of collaboration applications such as instant messaging (IM), conferencing, social media and mobility are being developed and deployed. As vendors start to bundle different types of collaboration applications around the email platform, the cost and complexity of these platforms are on the rise.
A number of service delivery models are evolving to make email delivery, access and management a lot more cost-effective for enterprises. Also, the changing nature of enterprises demands that they look at multiple options for sourcing their email. Today, a number of enterprises have a significant percentage of boundary workers (shop-floor personnel, contract staff and ad-hoc employees) that may not require the full functionality of on-premise email platforms. Leaner software-as-a-service (SaaS) offerings are emerging as an attractive alternative with their promise of predictable cost, ease of management and scalability.
In 2008, the North American hosted email market saw a healthy revenue growth of 11.1 percent and reached $319.1 million. Between 2008 and 2015, the market is expected to experience a compound annual growth rate (CAGR) of 9.6 percent to reach $604.4 million. (Note: The revenue projections do not include collaboration applications bundled with email over the forecast period.)