As Exchange grows up, it plays more strategic role

The e-mail server is becoming crucial for Microsoft to expand its applications to mobile devices and competing software

Long an important product for Microsoft, Exchange Server going forward will play even more of a key role in the company's plan to extend its collaboration applications to mobile devices and other software platforms.

Exchange Server 2010 will be released later this year, and Microsoft made a feature-complete release candidate of the messaging server available this week.

Exchange, which connects to the company's Office Outlook e-mail client on the front end, is one of the oldest and most successful of Microsoft's business products aside from Windows and Office.

Exchange also has a mobile component through the ActiveSync protocol that allows device makers to connect to Exchange and deliver e-mail via mobile devices.

Exchange has fought a long and successful battle against Lotus Notes to become the preeminent software delivering e-mail and groupware to business customers, and Microsoft said recently that Exchange is now a nearly $US2 billion business at the company.

Going forward, the product will take on an even bigger role to help Microsoft expand its online and mobile applications strategy, as well as its plan to reach other platforms besides Windows with its software, analysts said.

Exchange Server was the first of Microsoft's business software to be released in a hosted Web-based version several years ago, and the company has since followed suit with its SharePoint collaboration, Live Communications unified-communications and Live Meeting Web conferencing applications.

In Exchange 2010, Microsoft is highlighting features that integrate its on-premise and hosted versions of the product more closely together, which the company hopes will encourage companies to begin adding hosted services to their on-premise software.

However, while hosted services can be more cost-effective for an organization, some companies may need to keep some employee mailboxes in-house for security or compliance reasons, and continue to run Exchange on premise, said Chris Voce, an analyst with Forrester Research.

"For a lot of organizations, maybe a wholly hosted solution is not an option at this point," he said.

Still, being able to synchronize features like calendars and address books between the hosted version of Exchange and its on-premise version will certainly make it easier for an enterprise to create a hybrid environment that allows it to keep some of its employees' mailboxes on premise, and allow Microsoft to host other mailboxes, Voce said.

"The ability to make that happen -- allowing a company within their e-mail architecture to integrate a hosted solution with an on-premise solution -- is important for migration purposes," he said.

Exchange also is earning a higher profile because of the role it plays in Microsoft's mobile and cross-platform applications strategy, as evidenced by two moves Microsoft made last week.

One was a deal with handset maker Nokia to deliver a mobile version of Office applications to the latter's handsets, a move that will further drive Microsoft's strategy to deliver its productivity applications to more devices.

As part of that move, Nokia also renewed its license for ActiveSync, which allows people to push their business e-mail onto its devices from Exchange.

Exchange's role in driving unified communications to different devices-- letting people access e-mail, voice-mail and communicate with each other from any device -- is definitely raising its importance as a product, said Voce.

"It's part of the growing trend toward unified communications," he said. "In my mind, Exchange has always been a cornerstone in Microsoft's strategy."

Microsoft's embrace of Apple and other platforms for Exchange also shows the company trying to branch out with the product, said Rob Sanfilippo, an analyst with Directions on Microsoft.

Last week Microsoft said that the next version of Office for Mac will use the Outlook client rather than the existing e-mail client Entourage, thus giving people a similar experience and the ability to sync better with Exchange for business e-mail. And Apple also licenses ActiveSync to push e-mail out to its iPhone devices.

New support in the Outlook Web Access online client for Exchange 2010, which for the first time renders e-mail in Apple's Safari and Mozilla's Firefox browsers the same way it does in Internet Explorer, is also an example of Microsoft's intent to use Exchange to reach other platforms, Sanfilippo said.

"They're doing the cross-platform play as well to make sure Mac users and others on the Internet can use [the product]," he said.

Microsoft even is seeing an ally in longtime competitor Apple in supporting Exchange natively in its Mac OS. In addition to licensing ActiveSync, Apple is providing native support for connecting Mac applications to Exchange in the next version of Apple's Mac OS X, code-named Snow Leopard.

The move is aimed at making the Mac platform a better play in the business market, and is a nod to the importance of Exchange for business e-mail, analysts said.

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Elizabeth Montalbano

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