Calculating The Fully Loaded Costs Of Corporate Email: It’s Bigger Than You Think

by Ted Schadler

Since colleague Chris Voce and I published a pair of reports on corporate email in the cloud (one on the infrastructure and operations and one on the cost of running email on-premises or in the cloud), we have had dozens of discussions with our clients accompanied by detailed cost analyses of the true cost of running email on-premises versus running it in the cloud.

While the cloud-based cost of email is pretty transparent (many providers, including Microsoft and Google, publish their per-user per-month costs), the cost of running email on-premises is often a big mystery to everyone, including most CIOs. The big challenge is that the costs are spread throughout the budget: some in the hardware budget, some in the software budget, some in the storage budget, some in the cost of capital budget, some in the staffing budgets, and so on.

After dozens of these discussions and after a survey of 53 information & knowledge management professionals to ask about the cost of email, it is abundantly clear that few firms know their true cost of running email on-premises. And this matters if you're considering a move to cloud-based email.

But it an accurate calculation of on-premises email also matters if you are contemplating upgrading your email to a more current version that might support cheaper storage, higher automation, or reduced email database size due to eliminating redundant copies of attachments. You can compare your current costs against the fully loaded costs of the new system with its higher efficiencies.

So we spent four months building and vetting a detailed cost model to help our clients and the industry at large understand how to calculate their cost of running email on-premises. Here's a clue: It's more than you think.

When you factor in servers, storage, server software, software maintanence, hardware and software administration, power, archiving, message filtering, mobile costs, even financing, you find out that the cost of email for 15,000-person organizations can be as high as $40 per user per month, and even for a normal information worker without mobile email, it can cost more than $27 per user per month. Of course, you can and should segment your workforce into different tiers — for example, mobile executives, information workers, and occasional users — and provision them with different size mailboxes, email clients, and mobile email.

With all of that as input, you can calculate the fully loaded cost of email for each workforce segment.

The same data, presented as a table looks like this:

Of course, the prices come down for larger organizations and not everybody needs all these services. And sure, we can talk about higher automation levels, cheaper storage, more efficient message filtering, and the lots more, but at the end of the day, you have to factor in all the costs of running email on-premises if you are going to make a decision about upgrading or moving email to the cloud.

Have other thoughts? Want to discuss them? Please comment.