Hosted e-mail seats will grow 40 percent by 2012, survey says

Small, midsize businesses will help fuel growth

The number of hosted e-mail seats will grow by nearly 40 percent in the next four years, with small-to-midsize businesses contributing to a portion of the boost, according to a new study by The Radicati Group.

The study shows there are nearly 1.6 billion hosted e-mail seats today and that number by 2012 will hit 2.2 billion, which represents an annual average growth rate of 9 percent. The numbers include both enterprise and consumer e-mail.

Two sources of fuel for the growth are the evolution of the technology and IT's changing attitude about hosting. The hype around cloud computing also is helping interest in online services.

"E-mail is more of a commodity, and now a lot more things are being outsourced," says Sara Radicati, CEO of Radicati. "And I think a lot of the solutions have been getting better. They are more professional, and more of the providers better understand the customer relationship and how to manage it."

Providers are adding other features as well, including archiving, compliance, security and social-networking tools to make hosted offerings more attractive, Radicati says.

The survey breaks hosting providers into three categories: hosted business e-mail that targets companies with one to 1,000 mailboxes; managed business e-mail, typically used by large enterprises; and ISP- or Web-mail services that are largely free and target consumers.

Smaller businesses are likely to go the hosted route, but large enterprises may find that hosted e-mail is a fit for regional offices, Radicati says.

"All companies are starting to analyze the costs and trade-offs of hosting," Radicati says. "The real trick is going to be which provider can reliably offer this on a worldwide basis. Companies don't want different deals with different providers in different countries and then try to tie the whole thing together."

The survey says that over the next four years, SMBs will switch from standard-based SMTP hosted mail to a more advanced collection of hosted messaging services centered on e-mail.

The hosted business-e-mail market probably will consolidate, the survey says, as Google with Google Apps and Microsoft with Online Services begin to work out the bugs and attract a critical mass of customers.

"But I think it is a totally wide-open space at the moment," Radicati says. "Certainly Google and Microsoft are two giants, and they are going into this with full force."

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