In December, we published a bulletin titled Cost of Exchange 2010 Storage Not An Issue. This said that storage is now so cheap that Exchange 2010 users needn’t worry about storage costs.

We still subscribe largely to that view. However, it’s not true for organizations that are committed to storage area networks (SANs). Here is a more detailed analysis.

SANs are used in many Exchange environments. They are expensive, however, so many Exchange users prefer to offload rarely accessed and archived material to less expensive storage.

For example, 18 terabytes (TB) of NetApp Fibre Channel SAN costs about $240,000 when switches, controllers, shelves, and software are included. After allowing for snapshots, this gives perhaps 12 TB of usable storage, which translates to $20 per gigabyte (GB). Most customers run Exchange 2010 in RAID 10, which doubles the cost. Furthermore, many customers have redundant sites to provide for better recoverability. So total SAN costs often reach an exorbitant $80 per GB.

With Exchange 2010, the archive is part of the main message store. Additionally, message stores now contain a lot of material formerly stored in Personal Storage Table (PST) files. If SANs are used, the cost of the additional storage is crippling: An extra 5 GB per user translates to $400 per user!

Exchange 2010 responds to the problem by supporting more modern, inexpensive storage. This also reduces message store I/O by some 90%, since Exchange 2003 provides for slower disk speeds. Modern non-SAN storage costs are about $0.30 per GB, including RAID 10 and redundant servers.

Microsoft hopes that the new drive technology will thus resolve the storage cost problem. It will be useful in many cases, but it is not a panacea. Many organizations have a sunk investment in SANs for a number of applications. These organizations will be resistant to using a separate set of technologies, with separate management tools, for the special case of email.

Thus, for Exchange users who have invested in SANs and are committed to the technology, storage cost is an issue for all versions of Exchange, including Exchange 2010. For SAN users, third-party archiving tools will continue to be an attractive way of allowing live mailboxes to live on SANs while archives reside on less expensive media.

… David Ferris, with particular thanks to Alan Elliot and Kevin Hood of Mirapoint, for educating me on the real costs

Hosted Exchange vendor Intermedia has added integrated telephony to its offering. The focus is on sales to SMBs, up to around 1,000 seats.

Thoughts:

• Hitherto the offering has consisted of email, IM, fax, and SharePoint.
• This is the first time we’ve heard of a hosted email offering providing integrated telephony.
• Telephony doesn’t require high bandwidth. However, it does require short latency. Packets need to get through reasonably quickly. Think of Skype’s periodic problems. Latency isn’t a problem if the packets go over an in-house network. But when they go over the public Internet, as they will with SMBs, quality of service becomes an issue. Time is on Intermedia’s side, and by 2020 latency shouldn’t be a problem for voice throughout the world.
• Intermedia is one of the few hosted Exchange vendors to be making money. The company is privately held and doesn’t disclose revenues, but we estimate its hosted Exchange revenues at around $40M annually.
• For more information, go here.

… David Ferris

Hosted archiving vendor LiveOffice is expanding its supported data types. Hitherto, it has mainly archived Exchange email, with some instant messaging. As of March 2, LiveOffice is also archiving SharePoint teamspaces and Web site pages. The Web site support implies support for social networking Web sites such as LinkedIn, Facebook, and Twitter.

Costs:

• SharePoint archiving: $9.95/user/month
• Social Archive:$5/URL and $20/typical domain
• Volume discounts apply
• Search and e-discovery services are extra

For more information, go here.

Comments:

• Email is the most important data type to archive. However, ultimately what counts is information rather than the data types in which it’s stored. LO is right to extend its offering beyond email.
• SharePoint support is especially important. Very large amounts of compliance- and e-discovery-sensitive material are kept in these workspaces.
• The SharePoint support is initially limited to files and emails; e.g., no calendars or address books. Broader support for SharePoint content is planned.
• As of January 2010, FINRA started issuing guidance on social media. This is a clear indicator of the importance of these technologies to end customers.
• The Web site archiving works as follows: The user specifies the URLs of pages that should be archived, and how frequently a PDF snapshot should be stored. The PDFs are then archived; word lists generated by Adobe are indexed to provide for review and e-discovery.
• Most broker/dealers are small businesses, with simple Web sites. The static-URL-based scanning should suffice for most of them, as far as FINRA social networking compliance is concerned.
• The technology is very much version one in nature. It ignores the structure and meaning of the pages being stored, so searches are much weaker than they should be (more false positives and false negatives). Also, no doubt LO will want to add support for dynamically created URLs, such as database-driven content.
• APIs for social networks are still crude. They will improve, and that will help third parties such as LiveOffice provide much tighter integration.
• LiveOffice is privately held and doesn’t disclose its financials. Ferris estimates revenues at perhaps $30M annually for its hosted archiving and e-discovery business. The company is profitable.

… David Ferris

Last Friday (February 19), the chattering classes were gossiping about how cloud archiving vendor Smarsh had its Web site and phone lines down. Had the company suddenly gone down the toilet?

Everything was in fact OK. The company’s Ken Anderson told us:

• We had technical issues this morning that created some intermittent access to some of our services for some of our clients. No customer data has been lost or compromised – all back-end operations have been operating business as usual. Service has been restored, and steps are being taken to ensure that this sort of thing doesn’t happen again.
• The situation was exacerbated for us because it also affected our phones and Web site. Unfortunately, with the phone and Web site down, conditions were ripe for speculation. We have had an all-hands-on-deck client outreach effort today, making sure to communicate the status. (And as the communications rep, trust me, we are addressing these circumstances as well!)

So no real news here. It does illustrate, obviously, that cloud vendors need to have an extremely reliable offering. There is almost no tolerance for downtime.

… David Ferris

Iron Mountain announced it has acquired Mimosa Systems. This puts an end to over a year of rumors concerning Mimosa’s acquisition discussions with a number of possible suitors.

Iron Mountain has a vested interest in building bridges between customer on-premise deployments and its Digital Archive, and the company has been building partnerships with numerous on-premise archiving vendors to build bridges into their products. The idea is that as on-premise archives grow stale, customers will treat Digital Archive as a third tier of nearline storage at Iron Mountain’s hosting facilities. Today’s move places Iron Mountain into direct competition with other archiving vendors, and therefore casts a shadow over its partnership initiatives.

Thoughts:

• Allows Iron Mountain to offer on-premise archiving. That makes sense.
• Iron Mountain acquires a good-size customer pool that it will no doubt try to upsell into its Digital Archive.
• Also provides a new offering for Digital Archive customers.
• It seems rather late in the game to be entering the on-premise archiving market. Two powerful forces that Iron Mountain faces are the shift toward storing data in the cloud, and native archiving capabilities included in platforms such as Exchange 2010.
• By virtue of its leadership position in hardcopy archiving, Iron Mountain could be a dominant force in digital archiving. It has failed so far to achieve such a position.
• Iron Mountain is most reticent to give figures about its digital archiving business. We suspect that despite its major name in hardcopy archiving, those revenues are extremely modest.
• Iron Mountain has a series of archiving offerings that must now be sorted out. For example, it has its own code, plus offerings from MessageOne and MIMEcast. Products or services will need to be dropped, and interfaces made consistent. Integrating different products is difficult, and it’s not clear Iron Mountain has good skills in this regard.
• Iron Mountain has a very confusing mix of digital offerings. It badly needs to develop a clear vision of how these fit together.
• We hear that partly because of this confusion, the Iron Mountain sales team has a tough time selling the digital archiving portfolio.
• A million dollars here, a million dollars there, pretty soon you’re talking about real money ….. On the other hand, Iron Mountain is a large company. It can afford to invest $100M or so in acquisitions, without having to worry too much about the success of the investment.
• Iron Mountain has made a number of acquisitions, and established a number of technology partnerships. Some have gained traction, others haven’t. Overall, it feels like a strategy of trying this and that, and seeing what works. If you’re a big, rich, successful company, you can afford that approach.

Regarding the transaction:

• We estimate Mimosa was generating about $25M/year and had flat revenues. (ACTUALLY IT DID $20.6M IN CALENDAR 2009)
• Mimosa had never been profitable. We estimate it was losing about $10M/year. (ACTUALLY IT HAD $32.7M EXPENSES IN CALENDAR 2009, SO WAS LOSING ABOUT $12M/year)
• Mimosa took around $70M to $100M in investment funding. The investors had evidently decided not to put in more money, and the company was forced to find a buyer. See our December 2009 bulletin, “Mimosa Funding Challenges”.
• The $112M valuation is a roughly 4.5 multiplier on sales (ACTUALLY IT WAS A 5.4:1 RATIO). This is an excellent price for shareholders, especially in today’s climate. The goodwill generated toward Iron Mountain will help ease the trauma of a merger.
• We presume the VCs will get their money back, and the founders will get a small amount of money, but not enough to retire. Everyone else is probably wiped out.
• The $112M was probably largely determined so that VCs and bank-like creditors get their cash back.

All further input welcome: Either post here or email david.ferris@ferris.com. If you want anonymity, let me know and we won’t disclose your identity.

… David Ferris

Anti-spam vendor Cloudmark announced it has acquired Bizanga, which provides messaging software for service providers.

Comments:

• Helps Cloudmark offer a fuller messaging solution to service providers. That makes sense.
• Bizanga executed well in a very difficult, highly competitive market.
• It succeeded in getting some major, high-visibility clients, including Cox Communications.
• Bizanga investors had extremely high revenue expectations that were probably always unrealistic.
• Bizanga had taken about $12M in three rounds between 2003 and 2009. The company achieved a lot with that–most others would have eaten through much more.
• Purchase value guesstimated at $5M to $20M. Bizanga revenues estimated at perhaps $3M or $4M annually; Bizanga never really got into profitability.
• Very unlikely that investors got a decent return; at best they’ll have gotten their money back.
• Bizanga was a delightfully classy operation, reminding us that Man does not live by bread alone. Its gourmet dinners are fondly remembered by anyone lucky enough to have been invited (including your current interlocutor); its customers-and-us souvenir photo albums were also strikingly elegant.

Does anyone have hard information on the deal cut, and Bizanga’s P&L prior to the transaction? Please post here or email david.ferris@ferris.com if you can help–anonymity obviously respected if you want anonymity. Thanks!

… David Ferris

We’re hearing a series of rumors that something is going badly wrong at Dell/MessageOne. Eg:

• They’ve lost a huge amount of customer archived email over the past couple of weeks
• Many customers are making inquiries about other vendors and their ability to ingest/absorb their historic archive data
• One vendor told us they had been asked to help customers move their emails back from Dell/MessageOne and the most efficient way to ingest large amounts of data (10 TB for example)

Can anyone helps further? If you have input, please send to me at david.ferris@ferris.com or call me on +1 415 367 3436. If you prefer to be anonymous, let me know and we won’t publish anything that identifies you.

… David Ferris

There are three big players in the professional networking business: LinkedIn, Viadeo, and Xing. LinkedIn is best known in the United States. But France’s Viadeo and Germany’s Xing are important competitors. Viadeo recently paid us a visit. The company’s focus is on Europe and emerging economies. It has 25 million subscribers. It plans to enter the U.S. market through leveraging its international subscribers, such as those in Canada and Mexico.

Main services from the user standpoint:

• User directory.
• Users can belong to many different interest groups.
• Each interest group provides:
  • Common bulletin board/wall
  • Directory of interesting events
  • Q&A/forums for advice sharing
  • User-contributed news

Finances:

• Most use is free.
• Around 10% pay for services. This is pretty good compared with LinkedIn, which appears to have around 1% who pay.
• Fee is around 6 euros ($9) per month if you’re a paying subscriber.
• Ferris Research estimates revenues at $40 million annually. The company is profitable and growing at a healthy clip. It’s taken a total of 15 million euros ($23 million) external funding.
• Revenue breakdown:
  • User subscriptions: about 50%
  • Recruiting tools sold to HR and consultants: about 25%
  • Advertising: about 25%

Observations:

• The collaboration tools are conventional but attractive.
• The rich collaborative environment means that in principle, Viadeo can offer extremely targeted advertising, for which advertisers should be prepared to pay handsomely.
• Viadeo’s collaboration tools are an important point of differentation from LinkedIn, which is directory-centric.
• Viadeo’s localizations–e.g., it is currently offered in Dutch, English, French, Italian, Portuguese, and Spanish–are another important differentiator.
• Around 10% of subscribers pay up. This is pretty good compared with LinkedIn, which appears to have around 1% who pay.

… David Ferris

Charmingly named YippieMove helps you migrate email from one message store to another. It’s mainly aimed at small businesses and consumers, who are using a cloud-based service. Easy to use, $14.95/mailbox.

It’s just IMAP-IMAP email, no address book or calendar migration services. No, it doesn’t even migrate Notes apps.

… David Ferris

Archiving vendor Mimosa has recently had a couple of small financings:

• $3M of equity in June, 2009
• $4M of debt in November, 2009

Mimosa has never made a profit, and the recession of course has made fund-raising harder. We understand an IPO was deferred due to poor results. We understand, too, that Mimosa sought a buyer last year, but the valuations weren’t acceptable to management.

No doubt management is working hard to align revenues with expenses.

We don’t know the details, but presumably the cost of the recent financings has been high. In situations such as this, companies with good technology can find they’re forced into a fire sale buyout. Sometimes a small short-term debt financing is an immediate precursor to a fire sale.

If an acquisition takes place, it is to be hoped that the acquirer will continue to invest in Mimosa’s technology. Sadly, this doesn’t always happen. Many acquisitions end in tears, especially where the purchase was inexpensive.

… David Ferris

NOTE OF DECEMBER 9: THIS IS BEING REVISED PER READER FEEDBACK. WE UNDERESTIMATED THE NEED FOR THE USE OF EXPENSIVE STORAGE. FURTHER INPUT WELCOMED

Concern is sometimes expressed about the cost of Exchange 2010 storage:

• Users will have large mailboxes. 5GB to 20GB will be common. Take 10GB as a typical figure, allowing for three years of mailbox growth
• Then factor in some multiplier, perhaps 3 or 4, to account for the optional features of Database Availability Group. The multiplier could be much larger, but most organizations won’t go for maximal bloat
• So the average storage will commonly be around 30GB per mailbox

In short, user mailboxes are set to get substantially larger.

This will translate to many administrative challenges, but cost is unlikely to be one. At today’s prices, 30GB costs from $2 to $30, depending on the storage type. Amortize that over three years, makes $0.66 to $10 per mailbox per year. $10 is an absolute maximum, most storage will cost much less than this. Some of this storage will replace local storage used to keep PSTs. Looked at on a per-user basis, the cost of storage for Exchange 2010 are trivial.

… David Ferris

There are different approaches to sharing documents, where a group of people want to be able to make comments on a document and alter it.

One approach is Track-Changes, which we’re all familiar with in MS Word. This is very useful. But then, after three or four sets of changes, it gets too confusing. The Track-Changes approach is best between two people; it does a reasonable job of letting you see what changes have been made.

Another approach is one we’ve just been looking at, that of SharedDoc, from SharedBook. Here, someone owns/controls a document. Other people can post responses at arbitrary points to comment on the content. Subresponses of arbitrary depth are allowed. Here, comments aren’t applied, unless the owner specifically decides to allow them. Reviewers must be specifically selected by the owner. This is another approach valuable in a variety of contexts where one seeks reviewer input, such as proposals, legal services, business documents, and publishing. SharedDoc is in beta, by the way, and is currently free.

Some other approaches to editing shared documents include:

• Wikis, where people can go in and make changes directly, with an audit trail of the changes. You find this approach in Google Wave.
• Content management-style versioning. You also find this in SharePoint, for example.

… David Ferris, with thanks to SharedBooks’ Caroline Vanderlip for her interesting insights

Conferencing technology–such as Cisco WebEx and Microsoft Live Meeting–has two approaches to the audio element. You can route it over the data network, or you can route it over the conventional telephone system (”PSTN” or “Public Switched Telephone Network”).

In principle, it’s much better to treat the audio as just another data type for the conference and route it over a data network. This makes things much easier for users, because you can have tight integration with the conferencing application. No remembering and entering phone numbers, for example. And usually cheaper.

Internally, companies often run the audio part of conferencing over their in-house data network, because their internal network is fast enough and delivers data in a timely way. However, where participants must connect over public data networks, notably the public Internet, it’s common to fall back on conventional telephony, because voice transmission over public data network connections often is not quite good enough for the audio part of a conferencing session (even though most of us have experienced pretty good voice quality at times via Skype).

There are two reasons for this audio-over-Internet shortfall:

• Voice over IP technologies like Skype convey voices much less well when several people are chiming in and even talking over one another–as quite often happens in a conferencing session — than they do for a one-to-one conversation
• Conferencing behavior is very sensitive to slight delays in delivering the voice signal voice, known as “latency”. In the public Internet, there’s lots of latency, long and variable, as individual packets of data are delivered via widely varying routes through the network. For a discussion via electronic conferencing, that means all those subtle unwritten rules–about when and how it’s OK, or not OK, to chip in and interrupt–get really disrupted. Users find that very unsettling

When will the public Internet be good enough so that it’s the default for the audio element of conferencing? Our current guess is around 2014 in most rich countries. In other places, probably quite a bit longer than that. Could be 2040 in some places.

However, that only applies to users who depend on the public Internet, with its best efforts/no promises level of Quality of Service (QoS). More and more businesses are buying Wide Area Ethernet services from telephone companies. Those are IP networks, like the public Internet, but unlike the public Internet they use quality-enhancing techniques like MPLS that reduce latency, lost packets and other QoS problems. Users of such services will likely be able to realize the full benefits of routing both the voice and data parts of a conferencing session together over a data network, long before it becomes the usual method for users who rely entirely on the public Internet.

… David Ferris, with thanks to Michael Tyler for his helpful input

Today, PC-based conferencing vendors such as Cisco, IBM/Lotus, and Microsoft tend to focus on PC-centric innovation. Eg., support for multi-person video cameras, integration with PBXs, integration with desktop applications.

However, I think the biggest innovations, starting perhaps in 2012, will be found among mobile phones. These will have sufficient bandwidth and computing power to compete with desktops. However:

• Their user interfaces are severely constrained
• They are always with the user
• They have, or will have, location awareness
• They will have plenty of other very innovative aspects

Thus the exciting conferencing developments will, several years hence, turn around mobile phones.

The phones will remain small so that they can easily fit in a pocket. Obviously they’ll continue to get thinner. Innovation–in ways we don’t imagine–will help us get by with small screens. Presumably, videocameras will often be built in.

… David Ferris

Desktop sharing is a useful component of conferencing technology. Its main uses are:

• Document sharing, so people can work on spreadsheets, word processing documents, and so on, at the same time
• Informal peer-to-peer help desks and training. Where you show someone how to do something

… David Ferris

PS. I’m not sure I’m saying anything useful here! But I hope someone finds this useful.