We hear a lot of talk these days about the benefits of a hosted Exchange deployment.  Probably reflecting the desires of IT managers on the ground, Microsoft’s latest and greatest version of the Exchange messaging server, better known as Exchange 2010, was touted by Microsoft to be “designed from the ground up” to be equally at ease running as a hosted service or as an on-premise solution.

While running one’s Exchange server on a hosted service certainly does have its allure, e-mail administrators or IT managers ultimately need to consider and weigh the merits of both scenarios carefully.  So when does it make sense for organizations to opt for an on-premise deployment of Exchange?

Let’s take a look at some of them today.

More choice of anti-spam and anti-malware solutions

The state of spam and malware proliferation via e-mail today means there is little tolerance for any Exchange installation that is not protected by some sort of spam and malware filtering.  While most hosted Exchange providers incorporate some form of spam protection, choices offered might be limited or expensive.  The alternative would be to opt for a cloud-based anti-spam service by using MX forwarding, though adding in another hosted service does increase the recurring cost of the hosted Exchange deployment.

On the other hand, an on-premise installation of Microsoft Exchange gives businesses a free rein on whether they want to rely on a cloud-based anti-spam service or a traditional server-deployed solution such as GFI MailEssentials, which allows for a greater degree of configurability.  In fact, it is entirely feasible to deploy both in tandem if necessary.

Heightened confidentiality and compliance

Where there have been many prominent news reports of organizations shifting to a hosted e-mail deployment, a closer examination will show that they are often not companies in the financial, health or other tightly-regulated sectors.

The truth is that the outsourcing of critical installations does not exonerate an organization should something go wrong, as can be evidenced by the case of the prominent seven hours downtime experienced by Singapore bank DBS recently.  The fact that the affected infrastructure was operated and maintained by IT vendor IBM – and the mistake perpetuated by personnel from IBM, cut no ice with the government regulator, who slapped a number of measures on the bank to censure it for the outage.

Another complication inherent to an Exchange deployment has to do with how legal jurisdiction is typically applied based on the location of the physical server.  And what happens if the data is stored at an off-site location in yet another country?  In fact, compliance laws might mean that a hosted deployment might not even be legally possible in the first place – an aspect worth investigating first.

Increased Backup and Archival Options

Moving on, an on-premise Exchange deployment also offers much greater flexibility when it comes to e-mail archival and management of backups.  While all cloud providers will position their backup capabilities as a selling point, the recent data loss experienced by some users of online note-taking service Evernote is a sombre reminder that mistakes can and do happen.

Ultimately, an on-site installation presents the e-mail administrator with the largest number of tried-and-tested solutions that can be used to backup Exchange mailboxes under their charge.  In addition, companies interested in increasing their Exchange performance will also be able to make use of solutions such as GFI MailArchiver to help create backups of old e-mail without running afoul of e-mail retention policies.

Better performance

It is now an accepted practice to connect to Microsoft Exchange via HTTP, which contributes to administrators making the mistaken assumption that the performance for a local area network (LAN) deployment compared to that of a hosted Exchange server is similar. The truth is that an on-site deployment within the network will always perform better than any service hosted on the Internet – where it is subjected to the fluctuating conditions of one’s ISP connection or the bandwidth capacity of your hosting provider.

This is especially important since employees are increasingly using Microsoft Exchange not just for e-mails, but as a collaboration and productivity tool with which to track contacts, schedule meetings, or even to book company resources like meeting rooms and projectors.  And depending on company policies, IT managers might need to roll-out brand new workstations (or do a fresh install) every couple of years.  The performance of a local Exchange deployment will be much faster during these periods.