Some thoughts on Lotus Notes Hosted Messaging and TCO

November 9 2008

Three weeks ago, IBM Lotus announced Lotus Notes Hosted Messaging, a Passport Advantage fixed price offering where IBM hosts e-mail boxes for customers on a pay-as-you-go basis.  I've spent a ton of time in calls and conversations about this announcement ever since, and with more on this week's calendar, I'm thinking about why.

To recap, the offering comes in four flavors -- regular (99.5%) and high (99.9%) availability, and with or without the Lotus Notes Messaging license.  The price ranges from US$8 to US$14 per user per month.  This is the cost of, among other things, IBM providing the service, the hardware the server runs on, the administration of that server, the data center space and monitoring, backup and recovery,   Future plans include addition of iNotes, Blackberry, and Sametime instant messaging services.  Lotus Notes Hosted Messaging is one component of the Lotus brand's strategy to provide service-based offerings; others include Sametime Unyte and "Bluehouse".  This is still a relatively nascent strategy...while IBM has been in the data center and hosting business longer than all our competitors combined, the move to a fixed-price standardized approach is one of the aspects that makes the new offering so interesting.

The customer inquires and conversations on this have been diverse.  Some customers are looking for the "silver bullet" that will solve their operational cost issues with running an e-mail system.  Others are looking for hosting of applications, something that IBM does offer but not through the standardized approach.  Some know that SaaS/cloud/hosting are the buzzwords of the moment, so they're looking at it because they feel like they should.  A few have come to us because our competitors are suddenly running scared, pushing their hosting approaches with an "ours is better than IBM's!" sky-is-falling mindset that is surprising given how careful IT should be about decision-making in a time of cost-cutting.

It is that "silver bullet" group that continues to surprise me.  We did not announce Lotus Notes Hosted Messaging to be the bargain-basement hosted e-mail provider.  For what it's worth, Microsoft's Exchange Online isn't, either -- their cost calculator, which is clearly a theoretical model, has the typical cost in the $8-10/user/month range as well, whereas their partners like 1&1 charge less (as, I believe, do some of ours, though it's hard to tell through the grumbling that a few of them have engaged in).  Regardless, the response I've had from some customers is, "we think our internal costs are lower than what you are charging".  That may well be!  Consider Lotus Notes Hosted Messaging when you are looking for a predictable cost model, the expertise of IBM, the removal of concern around server upgrades (HW/SW) and maintenance, an approach for multiple sites or locations, and a single-vendor solution.  As more services are added to the Lotus Notes Hosted model, it may well be that the economies-of-scale change, and the offering may appeal to additional customers.  But like most things in the IBM world, we did not create this offering under the belief that it is the best or only approach -- IBM offers a range of solutions.  In fact, Lotus Notes Hosted Messaging is not our only way to approach the problem...IBM Global Services can do a broader custom proposal (still at a fixed cost) or there's the complete strategic outsourcing model that has existed for ten or more years.

What the introduction of Lotus Notes Hosted Messaging may really mean for customers is that it is a catalyst to look at your operational costs.  Too many organizations don't know what the operation of your e-mail/collaboration systems costs, and those that do may have ways to optimize.  One of the things my team is looking at is a set of tools to help you with operational streamlining of your Notes/Domino environment.  The Lotus brand services team is especially good at "health check" and TCO optimization exercises, and there are so many tools that have been introduced in Notes/Domino 7, 8.x, and coming in 8.5 to help.  When I first started looking at Notes/Domino TCO ten years ago, we saw costs that were 5-10x what they seem to be today.  Whether you look at a hosted or on-premise deployment, the opportunities exist -- and moreso with the release of Domino 8.5 -- to streamline.  

Your suggestions or experience on what you did that helped with your operational costs would be appreciated as this topic is the subject of much energy at the moment.  Thanks!

Ed Brill Highland Park, IL USA Category:  Notes and Domino 8  Add/View Comments [18]

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  1. 1  Bruce Elgort http://elguji.com/Ideajamtour | 11/9/2008 7:34:00 PM

    Now if Lotus can come up with affordable application SaaS pricing for it's Domino server you may be on to something. We are seeing lots of interest for our products to be available as SaaS.

  1. 2  Ed Brill http://www.edbrill.com | 11/9/2008 7:39:50 PM

    Bruce, I didn't get your e-mail on that if you sent it. As I told you on Friday, there is an xSP program that can help.

    "The xSP contract provides the terms which allow an xSP to acquire and use IBM distributed software licenses to provide IT commercial hosting or other information technology services to third parties. The software licenses are retained by the xSP. The licenses are not resold, leased, rented, or transferred to third parties."

    Seems like that might help? We're also continuing to look at a Domino+application license model, but that will take time.

  1. 3  Chris Stevenson http://www.thinksis.com | 11/9/2008 7:42:19 PM

    Ed - I'd love to see what approaches others are using to figure their TCO versus the SaaS model offering. As a small business and IBM partner, it's definitely got our attention although as a discussion topic only at this point.

  1. 4  Keith Brooks http://www.vanessabrooks.com | 11/9/2008 7:57:05 PM

    As one who criticized the price, I am interested in knowing more of course because as you point out, it DOES work for some organizations.

    One thing which would be really nice, let me know if this is in Partnerworld, is a spreadsheet like check box where it lists all the possible points of $$ related to the infrastructure and we can tally it up for a customer and then the simple #'s from the IBM solution and do the ROI in seconds. Okay days as clients may need to gather some data.

    You may say, go do it! But as I pointed out, my

    spreadsheet either misses points you include or well maybe IGS really does have a better handle on this and in that case I look forward to the session at Lotusphere on BP day on this subject.

  1. 5  Mike Lazar  | 11/9/2008 8:25:46 PM

    Ed -- What I've found selling a fully managed service over the past 5+ years is that customers don't know what their actual internal cost is, nor do they have the ability to fully put a number on that cost. We tell them all of the components we say go into the service, (can't mention them all since that's a competitive advantage, don't ya know...) and they either say that they can't figure out what part of those variables are for email/collaboration, or they will argue that those costs can't be considered part of the equation. It's very, very difficult to get them to a cost that they actually believe is true. So, if I tell them that I can do it for $5, $8, $10, or $15, it's never an apples to apples comparison. Getting past that is the hardest part of the sale. Sometimes I get there, sometimes I don't, but I'm certainly not giving up because of the 2 elephants that have entered the market this year.

  1. 6  Andrew Pollack http://www.thenorth.com/apblog | 11/9/2008 10:37:56 PM

    I remember when this was going to be a big deal for AT&T about what, 16 years ago? Maybe the time has come for this to work. I can't even imagine the implications of outsourcing email from a legal standpoint, but given that IBM has an army of people to imagine things like that, I'm sure there's a solution.

  1. 7  Nathan T. Freeman http://nathan.lotus911.com | 11/9/2008 10:49:15 PM

    When I first started looking at Notes/Domino TCO ten years ago, we saw costs that were 5-10x what they seem to be today.

    Y'know, for my money, this just can't be emphasized enough. The TCO of Notes/Domino systems over the last decade has just plummeted, especially if you're one of those shops that follows the "browser-client only" model. (Note: lower COST of ownership means fewer BENEFITS of ownership in that case.)

    My jaw hits the floor when I look back at some of numbers we used to see for email systems in the mid-90s. I can't believe email alone was ever worth that. :-)

  1. 8  dan lynch  | 11/10/2008 7:12:37 AM

    Ed;

    For larger enterprises dealing with the newer Federal Rules of Civil Procedure enacted on 2006 and associated e-discovery challenges and expense, the ability to archive/preserve, search/produce and retain/auto delete email data in a hosted model would be important, must-have requirements. Legal groups would also have to be comfortable with a 3rd paarty having care, custody and control of critically important email data that is always the first thing asked for when plaintiffs come calling.

    Obviously those kinds of services would not be included in a price point mentioned above. Are those kinds of things on the roadmap at all, given the large challenges and potentially astronomical expense of doing that stuff?

    Thx

  1. 9  David Wilkerson http://www.geedavid.com | 11/10/2008 7:56:44 AM

    Ed,

    What support will this offering have for organizations that decide to move from a hosted solution to an internal one? What will happen to the various technical artifacts after a migration? What can we partners do to assist our customers in either direction?

    Thanks

  1. 10  Pete McPhedran  | 11/10/2008 8:50:37 AM

    Ed,

    The xSP program was killed about 5 years ago. We had heard through various sources and random web pages that a different xSP "offering" was available as per your message here. However we have had no luck in finding anyone whether in IBM or at a distributor that was able to get any traction on this offering.

    Do you have a name/number/email for someone that we can contact that can help with this?

    --Pete

  1. 11  Ed Brill http://www.edbrill.com | 11/10/2008 9:19:19 AM

    @10 most of the documents, including the one I quoted @2 above, are marked IBM internal. But the documents are all current -- they've been updated within the last 12 months. The contact e-mail address is xspsw@us.ibm.com . I am not sure if they are set up for partners to contact them directly, but I am not sure I'm going to be helpful as a conduit.

    @9 data migration is a costly/complicated process, so we are not programatically offering anything here at the outset. It can be done through a custom proposal...not sure there is a partner angle yet.

    @8 These are on the roadmap for the standardized offering, but also are already available in custom IBM services proposals. We recognize how important the compliance/retention aspects are to running messaging today.

  1. 12  Warth Publishing Inc http://www.warthpublishinginc.com | 11/10/2008 12:05:08 PM

    Rather than bore you with my long fight with 1and1 just ask yourself why their phone is answered by a recording that tells you what to do if you have been contacted by NCO, a collection agency. If they are above board why do they have to send so many accounts to a collection agency? Also Investigative journalist, Kelli Jack, has written 30 articles about this company and has a suit pending against them. Kelli alleges that 1and1 stole her domain name and sold it. Kelli states: "1and1 should be shut down."

    And finally, the Pennsylvania Better Business Bureau and the Washington DC Better Business Bureau has them listed as "Unsatisfactory" Read comments on the BBB why. Read some customer comments on Red Flag.

    I have not paid 1and1 for what I consider fraudulent charges. They have locked my account so I have no access to it. However, they keep renewing domains that I don’t want renewed. What respectable organization would do this?

  1. 13  Peter de Haas http://www.peterdehaas.net | 11/10/2008 1:27:34 PM

    Ed,

    Thanks for promoting Exchange Online.

    While the price for Exchange Online online starts at about $8 / user / month, the total suite, consisting of Echange Onlne, SharePOint Online, Office Communications Server Online and Livemeeting is only $15 / user / month.

    In the $8 cost for Exchange Online also Exchange Hosted Filtering (anti Spam / Anti virus is included

  1. 14  Ben Poole http://benpoole.com | 11/11/2008 3:29:20 AM

    "In the $8 cost for Exchange Online also Exchange Hosted Filtering (anti Spam / Anti virus is included" That's great Peter, but in fairness, AV and anti-spam would *have* to be included if the Exchange Online system is going to be viable as an email solution, surely?

  1. 15  Bernard Devlin  | 11/11/2008 9:24:39 AM

    @12, I've also had problems with 1and1, as have others I know. They issued me with outrageous charges for network activity for which they could provide no further information, and it took months of arguing with them to get the charges reduced. I'm still considering court action against them. I closed my account with them immediately.

    I wouldn't recommend 1and1 to anyone, not even if they were hosting Domino applications!

  1. 16  peter de haas http://www.peterdehaas.net | 11/11/2008 10:17:57 AM

    @14

    Ben,

    should have seen that one coming. On the other hand Notes email Online is shurely not immune for Spam ;-)

  1. 17  Ed Brill http://www.edbrill.com | 11/11/2008 7:09:37 PM

    @16 and it likewise includes anti-spam and anti-virus in the price.

  1. 18  Peter de Haas http://www.peterdehaas.net | 11/12/2008 5:55:06 AM

    @17,

    And mobile integration (WIndows MObile, Nokia, iPhone) + Browser Access + Partner resell fee) ?