What's Your Exchange?

Joe Wilcox Microsoft released Exchange Server 2007 to manufacturing yesterday, according to a late-day post on the Microsoft Exchange Team blog.

Also available: Evaluation copies of Exchange Server 2007 and Forefront Security for Exchange Server.

Microsoft launched the products last week, along with Office 2007, SharePoint Server 2007 and Windows Vista. Microsoft also offers evaluation copies of Office 2007 from the Office Online Web site and Windows Vista through the Microsoft Developer Network.

Also yesterday, Microsoft released several updates for Exchange Server 2003: Migration Wizard for Lotus Notes, Connector for Lotus Notes and an update for correcting Outlook Web Access problems related to Internet Explorer 7.

Server-to-Desktop Sales Pull
Exchange is one of Microsoft's most important products and it is increasingly becoming the model for newer software, such as SharePoint Server. Before becoming editor of Microsoft Watch, I worked as a senior analyst for JupiterResearch. In evaluation of Exchange and Office, we concluded that much of the productivity software's success came from ties to the server software. The Outlook-Exchange ties created tremendous sales pull for the Office suite, among enterprises. A similar phenomenon is occurring with smaller shops that deploy Small Business Server 2003, which includes Exchange Server 2003.

Microsoft is using the same server-to-desktop sales-pull model with other server-based products. Tip-off: Any server product with "Office" as part of the name. The objective is twofold: pulling Office upgrades and generating new server software sales. Microsoft's big benefit is increasing CAL (client-access license) sales, particularly from newer server-side features, such as spreadsheets, forms and instant messaging.

At one time, Exchange also acted as a broader communications hub for messaging. However during the 2003 release cycle, Microsoft pulled out some capabilities and created separate products, such as Office Live Communications Server. The breaking out of features is an ongoing Microsoft trend, by the way. The company breaks out more features into separate products, which increases the number of products and CALs to sell.

Version 2007 somewhat revives Exchange Server's role as a broader communications hub, not just e-mail. Exchange Server 2007, along with Office Communications Server 2007, anchor Microsoft's "unified communications" strategy. With Exchange Server 2007, Microsoft touts new voice-over-IP and voice-recognition features. In one scenario, users can call in to access e-mail and appointments while on the go. Exchange Server 2007 can read back e-mails, or the user can verbally schedule or change appointments. For anyone stuck in traffic or an airport without Web access, the functionality means access to vital information by voice.

Exchange Hosted Services
The other very important significance of Exchange Server 2007: hosting capabilities. Microsoft has offered hosting capabilities for some time but hopes to extend its reach and appeal with Exchange Server 2007.

A recent Gartner report concluded that "Microsoft will eventually use the Exchange Hosted Services data centers to forge into the software-as-a-service market with complete hosted e-mail infrastructure services in addition to existing IM hygiene services."

As recently as September, Microsoft had "six [Exchange Hosted Services] data centers in the United States and three in Europe," according to Gartner.

Microsoft's enterprise software-services strategy remains somewhat unclear, although forthcoming Dynamics CRM Live foreshadows one of several destinations. Not surprisingly, Gartner concludes that the SMB market will be early adopters of hosted services. That conclusion resonates with the success of Salesforce.com's hosted CRM for SMBs.

If Microsoft succeeds in the hosted services market, it won't do so alone. "Microsoft's channel will be hard for incumbent leaders to beat," Gartner concluded.

Speaking of the channel, Microsoft's plans to change its Exchange updating model could create some management hardships. Last week, a Microsoft Exchange Team post explained how updates would release "every six to eight weeks," which would be rapid-fire pace compared with earlier Exchange versions. The approach makes loads of sense for Hosted Exchange Services, where being lithe would be essential to competing in Internet time. For enterprises deluged with patch management, the updates would be a hardship for them or services providers.

The approach is one to watch as Microsoft extends its consolidated Microsoft Update mechanism. Microsoft is going to get a lot more aggressive about pushing out patches and feature updates.

Security and Anti-spam
Forefront security software, derived from Microsoft's Sybari acquisition, also weighs into Microsoft's broader Exchange Server strategy. The same Gartner report concluded that "Microsoft is poised to become the de facto leader in the e-mail security market. Although its current market share is middling, it will be difficult [for other security software companies] to compete with the addition of anti-spam and antivirus services as part of both standard and enterprise licenses for Exchange 2007."

Gartner's conclusions are a potential blessing and curse for enterprises looking to deploy Exchange Server 2007. Improved security and spam filtering can simplify technology deployment and management. However, Microsoft success could lead to consolidation of the enterprise security software market, leading to less competition and choice.

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