The snappily-titled Microsoft Business Productivity Online Services (BPOS) offering, announced some price cuts the other day…

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I heard from someone internally that the price cuts were driven by increased economy of scale – ie. as more customers signed up for BPOS, the cost per customer of providing the services has fallen, and the saving is being passed on.

There’s an online pricing calculator to get an estimate of what it would cost to adopt, but if we took an example of 250 seats of Exchange Online (ie not the full BPOS suite), it would be around £805 per month, or just under £10,000 per annum.

Now that might sound like a lot for only 250 seats, but if you compare with the license costs to buy a server or two, 250 Client Access Licenses and the Enterprise CAL for email protection, you’d be looking at around £15k for software licenses, plus hardware costs (let’s say another £5-10k) and the staff costs to maintain the Exchange environment. It might start to look pretty attractive to outsource the whole “keeping email running” task, and just pay for it to be online.

Some customers like the online services model since it is an operational expense (OPEX) rather than having capital expenses for servers & storage hardware, which is depreciated over a number of years.

Finally, an example of where Online Services might suit particularly well… one fairly well known company (who shall remain nameless for the moment), were still muddling along on an old Exchange 5.5 environment. On Wednesday, the server shuffled off this mortal coil to join the choir invisible, causing a good deal of consternation in the business, who were now completely without email.

I’ve said for a long time, that Exchange is the only mission critical system in most businesses, which affects everyone immediately. If the CRM or billing or the payroll systems fell over, sure, it would be important – but most people wouldn’t know right away that it had happened. Email goes down, and most businesses will feel pain right away.

Back to example company. As fire rained from the sky, they took the decision at 4:30pm to buy 110 BPOS accounts, which were provisioned in 15 minutes and the business was fully back up with email up and running, later that evening.