Google’s Gmail Threat to Excchange

Implications: Google’s free consumer Gmail has gained a large and loyal following.  Google would like to leverage that to dethrone Microsoft Exchange in enterprises.  While Microsoft should be careful not to underestimate the threat, Google faces formidable challenges, not least of which is security.

Analysis: Once upon a time, there were many enterprise email solutions that competed on more-or-less even ground.  IBM’s Lotus Notes, Unix Sendmail, Microsoft’s Exchange and a few others.  Over time Exchange has come to dominate the landscape.  Notes in particular still maintains a loyal following, but Exchange has 60+% of the corporate mailboxes (per the attached article).  Google would like to change that ranking to put their Gmail offering at the top.

Google has made an excellent start.  Gmail is widely used today for personal emails and has been able to provide a compelling offering.  Not only is usage free, but storage limits are generous, performance is good, and reliability (despite a couple of recent well-publicized outages) has generally been excellent.  Their enterprise offering isn’t free, but the cost is so low as compared to most alternatives that it is effectively nearly free.  The economics of the case clearly favor Gmail.

On the negative side, there are still a couple of major issues to overcome.  First is the reliability concern.  Although overall Gmail has posted reliability numbers rivaling those of better in-house Exchange systems, every outage they have has been publicized.  CIOs have read those headlines.  Worse yet, CFOs, CEOs and other non-technical executives have read those headlines as well.  Before any CIO can adopt Gmail as an enterprise standard, s/he will have to address the reliability issue with the executive team.

A second and much larger concern is security.  A recent quote from Gunter Ollmann, chief security strategist at IBM's Internet Security Systems unit:  “… today’s CAPTCHA-breaking methods have become so effective that for about $100, the [hack-for-hire] service provider can not only promise to give you the password to a specific Webmail account, but it can also promise to give you subsequent passwords if the legitimate owner should change passwords.”  This is truly a scary prospect and a serious issue for enterprise Gmail.  While CIOs love to offer money-saving plans, likely the greatest fear of every CIO is seeing their name in the headlines attached to a security breach.

The security, reliability and performance of enterprise Exchange systems depend largely on how well the system has been implemented and maintained.  A good Exchange implementation will provide high levels of security, excellent reliability and performance both through the Outlook client and the Web interface.  On the other hand, achieving such a “good” implementation is not easy and requires a high level of Exchange knowledge and skill, which is particularly difficult to find in the SMB market.

Google seems on track to be a real threat to Microsoft, which Microsoft cannot afford to ignore.  Gmail wins on cost, and provides a solid level of performance and reliability.  Google must address the security aspects of Gmail to win enterprise accounts.  Microsoft, on the other hand, must address the cost and complexity of Exchange.  Nobody knows who’ll be winning this war in five years, but it’s a safe bet both Microsoft and Google will still be fighting hard.  The enterprise email/Office user will be the winner!