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A Look at the North American Hosted Email Market

Yes, I know, e-mail is so 2009 (or is it 2005?). But the fact remains, when it comes to business communications, most of us use email more than any other technology. That's partly due to habit and tradition, but it has a lot to do with openness and interoperability, too. Users can email anyone, anywhere and any time, without worrying about what network they're on or which interface they're using. Unlike phone calls, email is persistent. And, it's easy to rope in multiple parties, for group discussions.Do we expect the various elements of unified communications, including IM, conferencing and various social media, to replace email as the go-to client someday? Sure. But someday isn't tomorrow-and until then, the market for enterprise email, while mature, remains robust. Indeed, overall email usage is expected to be growing at a rate of 15 to 20 percent a year during the forecast period.

Generally, there are two delivery models for enterprise email: Hosted and on-premises. Hosted enterprise email is delivered by a service provider via its own data centers. Features of hosted email services include network access and software management; centralized administration of mail boxes; one-to-many, single-instance, multi-tenant architecture; centralized software upgrades, including version and patch administration; and integration with other communications and collaboration applications, either as a service mash-up or as a plug-in to a platform as a service.

The hosted enterprise email market is taking off as companies grow more comfortable with the idea of releasing their mission-critical applications to the cloud--thanks in large part to the entry of large cloud-based email service providers such as Google, and the SaaS efforts of on-premises vendors Microsoft and IBM. Couple that with the growing cost and complexity of email systems today, and it's easy to see why an increasing number of enterprises are looking at provisioning their email as a service.

Here are some of the highlights from our latest study, North American Hosted E-mail Markets, conducted by my colleague Subha Rama. Look for data from the World On-Premises study next week.

* In 2008, the North American hosted email market saw a healthy revenue growth of 11.1 percent and reached $319.1 million in total revenues. Between 2008 and 2015, the market is expected to experience a compound annual growth rate (CAGR) of 9.6 percent to reach $604.4 million.

* Despite widespread downsizing of IT budgets in 2008, the hosted email market saw its installed base grow by 20.5 percent to 14.9 million email boxes. Between 2009 and 2015, demand is expected to grow at a CAGR of 18.1 percent to 47.8 million email boxes.

* Frost & Sullivan believes that the hosted email market, which currently accounts for only 15 percent of revenues in the overall email market in North America, is still in its early stages of development and faces attractive growth opportunities. Partly, that's because the market has begun to accept the fact that there is some trade-off between costs and control. Multitenant cloud-based email offers significant cost advantages with minimal control over an enterprise's email infrastructure-and more IT managers are accepting that reality.

* Competition in the hosted email market is intensifying, with a number of large and small market participants vying for a share. The hosted market is also experiencing greater innovation, attractive bundling options, and new ways of monetizing email services that reduce the average cost per inbox.

* The bulk of the hosted email customers are SMBs. SMBs, including SOHO, accounted for 76 percent of the market revenues in 2008.

Frost & Sullivan clients can download the full report at; it goes into much more detail on trends and fully evaluates the leading market participants.