Two weeks ago, Microsoft announced new services that might drastically change the email technology used by small businesses. Let me give you some background, then give you some information about Microsoft Online Services – a way for a small business to have its Outlook folders stored online by Microsoft.

Companies running Exchange Server for Outlook reap tremendous benefits. For example:

  • The same Outlook folders can be displayed on multiple computers at multiple locations. You can use your Outlook folders seamlessly from a desktop computer at the office, a desktop computer at home, and a notebook computer on the road, and Outlook is always up to date at all locations.
  • Calendars and address lists can be shared.
  • Outlook folders can be accessed online through Outlook Web Access – full access to all Outlook folders presented in Internet Explorer, like other webmail services.
  • Windows Mobile devices can sync over the air.

It’s a rich environment.

Traditionally that has required a small business to run its own Exchange Server (included with the Small Business Server suite). A small business does not strain Exchange Server, which is remarkably robust and frequently troublefree, but make no mistake – it is fiercely complex and problems can happen. I dive for the phone to pay Microsoft for support when there’s a problem with an Exchange database.

Microsoft developed a community of partners – big companies offering “hosted Exchange” mailboxes. A small business would pay a monthly fee to the big company to have the Exchange database stored online for all the business users. Outlook works completely smoothly with that arrangement; for the users, there’s literally no difference between that setup and having the Exchange Server down the hall. The responsibility for backups, database maintenance, security updates, and upgrades is shifted to the big company.

Until recently, small companies mostly stayed away from hosted Exchange accounts. The big companies were unfamiliar (heck, the whole concept was unfamiliar), and the prices were just high enough to dissuade business owners from moving away from traditional standalone copies of Outlook. (I set up several people with individual hosted Exchange accounts, offered by, but even those were tough because people weren’t familiar with the concept.)

Two weeks ago Microsoft announced the details of Microsoft Online Services. Microsoft is bypassing its partners and offering hosted Exchange services directly. Pricing is still not cheap – $10 per user per month for 1Gb of mailbox storage space, with more space available at a cost for oversized mailboxes. But it comes with Microsoft’s name behind it and it comes at a time when people are being bombarded with references to storing things “in the cloud.” People are becoming familiar with the idea of having important data stored online.

Microsoft's per-user monthly fees for its online business services.

As always, there are a lot of details to process. You can see from the chart that there are many levels of service, and other services in addition to Exchange. I’ve been testing the beta and there were kinks getting things set up. It’s possible to integrate this service with an existing onsite Exchange Server, and it’s possible to migrate from an onsite server to the hosted service, but there will be some technical hurdles to make that work.

Meanwhile the partner community is reeling, feeling betrayed, because this puts Microsoft in the position of competing with them directly and even potentially taking customers from the partners. Microsoft has set up an elaborate commission structure to try to soothe them but there is a lot of bitterness out there. I don’t think that will slow things down but be alert for yet another round of Microsoft-bashing.

This might be one of those moments that changes the standard setup of computer services for a small business. The demand is already there for universal access to email, calendar and contact lists; this responds to some very real needs being expressed by every business. I expect to be talking about this with many of my clients that do not presently have a server.

Even more interesting, there are consultants in the Small Business Server community who wonder whether this will be such a compelling alternative that they should not recommend Small Business Server 2008. It could be that a small business will have a server onsite to do nothing more than file and printer sharing, and all the other company technology will be online services.

There are changes ahead! This is another one that deserves some attention. Here’s more information about the presentation of Microsoft Online Services at the Microsoft Worldwide Partner Conference in early July. There’s a demo at the MOS beta site. Here’s an overview of Microsoft’s step into this space. It’s interesting stuff!

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