Many Firms Underestimate Email’s Full Cost
Forrester also asked about how many servers and mailboxes our respondents are supporting today. The responses reflect the range of firms that we surveyed, and when we calculated the number of
mailboxes per server, the results were not surprising – they were all over the map (see Figure 1-3). When Forrester asked the firms what they thought their email cost them, we were surprised by the
lowball estimates and the lack of consistency. These execs think that email costs them anywhere between $2 and $11 per user per month, with the majority guessing $10. When we spoke with these
executives, their reasons were many: “Our system is fully depreciated,” “Hardware and support are in someone else’s budget,” “We get email for free in our enterprise client license.”
But even a rough calculation shows that the monthly cost for email hardware and software alone is more than that. And when you add in the costs of staff, maintenance, storage, archiving, mobile email, and financing, it can be four times higher. So while the cost to an individual budget holder might look low, the fully loaded cost of email is surprisingly high.
Calculate Your Fully Loaded On-Premise Email Costs
It’s hard to figure out what email actually costs. We know because it took us months to track down all the costs. Even breaking out the email client software costs is difficult, particularly in an era of bundled
pricing and maintenance costs for desktop licenses. And when you throw in complex server licenses, hardware managed by someone else far away, ever-accumulating storage, support services provided by
other IT groups, and financial costs like deprecation and the cost of capital, it gets downright ugly.
Our email cost model includes all of these costs and more
Software costs include maintenance and support.
To calculate the client and server email software costs, you have to include annual support costs and the cost of installing and maintaining the systems. And to calculate the cost of the email license in a bundled product, you have to estimate what each piece of functionality is worth to the firm. For example, you must assign a cost of the Outlook client software if you are a Microsoft client. In our model, the
fully loaded software costs are 20% of the total cost of serving a mobile executive.
Storage and archiving costs accumulate over time, as attachments pile up.
Email attachments are the biggest storage cost for email, and that cost is growing rapidly as attachments soar in size and accumulate forever. And archiving, continuity, eDiscovery, and regulatory reporting add
significant cost to email. In our model, the fully loaded storage and archiving costs are 31% of the total cost of serving a mobile executive.
Staffing costs include the administration of every piece of the solution.
Each cost component — hardware, software, storage, and so on — has staffing costs associated with it. We show these details in the spreadsheet model itself, but here we aggregate them into a single staffing cost. In our model, the fully loaded staffing costs are 14% of the total cost of serving a mobile executive.
Hardware costs include operating systems, power, and data center costs.
The purchase and installation costs depreciated over three years are just the start of a fully loaded server cost. To calculate the actual cost, you must add in these other factors. Power alone is much more expensive than the kilowatt hours; it also includes the cost of power backup, cooling costs, and power redundancy. In our model, the fully loaded hardware costs are 2% of the total cost of
serving a mobile executive.
Financing costs are calculated here as the cost of borrowing.
When Wall Street calculates what your share price should be, they use a “weighted average cost of capital” to determine how expensive your assets really are. But instead of this higher rate (often 12% or 15%), we use the much lower financing cost of 7% in this model to calculate the financing costs of hardware, software, and storage. In our model, we bundle financing into the individual line items for hardware, software, and storage. But if were to break it out, the fully loaded financing costs are
3% of the total cost of serving a mobile executive."
