Wikibon has completed a number of previous research papers on Exchange infrastructure. One of the key findings was that the infrastructure recommended by Microsoft, especially the use of direct attached storage (DAS), was not optimum for large installations. With the availability of Exchange 2013 and significant functionality in Windows 2012, Wikibon members are asking for an update to the research, and again are asking if Microsoft’s recommendations were best practice or best for Microsoft.
Microsoft, spurred on by competition from Google Apps, has made major improvements to the suite of programs that make up Unified Communications (UC), namely Microsoft Exchange 2013, SharePoint 2013 and Lync 2013. In addition, it made major software infrastructure enhancements to Hyper-V and Systems Center. It also improved Windows OS 2012 functionality, including Storage Spaces, which offers a host based storage infrastructure which Wikibon has generically named Server SAN.
Microsoft has also delivered Office 365, which is essentially Unified Communications as a cloud service. Wikibon members want our view on when and where adopting Office 365 makes sense and what are the comparative costs of Office 365 vs. an in-house implementation of Microsoft Unified Communications.
Wikibon has expanded the scope of our previous research to include addressing the following questions:
- What is the business case for moving to Microsoft 2013 Unified Communications?
- Should IT implement UC 2013 immediately, or should IT recommend waiting for new versions or new functionality before undertaking migration?
- Should Exchange infrastructure continue to be separate, or should the best practice approach be to provide a consolidated infrastructure for all the Unified Communications components?
- Are Hyper-V and Systems Center sufficiently robust to support large Microsoft Unified Communications configurations?
- Should IT adopt the Microsoft recommendations to take a DAS approach to storage by using Storage Spaces?
- What are the comparative costs of on-site UC vs. Microsoft Office 365?
The sections below show four major imperatives for optimizing the value of Microsoft’s integrated UC 2013 product:
- UC 2013 offers major productivity benefits for the enterprise, and its components should be integrated and implemented together. If this requires a change in organization, it should be done as quickly as possible.
- IT should not enter into a debate on using a Server SAN DAS implementation. Traditional storage arrays are much cheaper and faster to implement, and there is no benefit in committing IT resources to a new storage topology, with the illusory benefits claimed by Microsoft. There is even less benefit in losing productivity improvements from UC 2013 by delaying implementation.
- IT should not enter into a debate on using UC 2010 because it costs a little less to implement. The additional costs are minuscule compared with the potential productivity benefits. It only take 14 seconds of increased productivity per day for end-users to justify UC 2013 – the no-brainer of all no-brainers.
- Office 365 is a good cloud service, which offers many of the same productivity improvement of UC 2013. However, Microsoft seems to have mis-represented the true costs of large-scale Office 365 implementation. Additional resources are needed to monitor the service, integrate it into other enterprise services, and provide the levels of availability that enterprises expect. In addition, an in-house service will almost always offer better user response times that external services, and with it better end-user productivity. Office 365 is currently not a viable option for larger enterprises - unless the headcount is under 300, or there is a total ban on all CAPEX investment (and OPEX budget is available). There may well be individual locations or groups of employees that should be outsourced to Office 365. In general these groups should have little interaction with the rest of the organization.
The sections below establish an imperative to establish a unified communications strategy. Wikibon believes that IT should focus on implementing a full-function integration of UC 2013 as quickly as possible and avoid individual departments having to split away with Office 365 to obtain the end-user productivity benefits.
Introduction to Microsoft Unified Communications 2013 & Wikibon Methodology
The most important benefits of Microsoft Unified communications include:
- The ability to integrate email, voice and instant messaging into a cohesive communications system, with common information shared between the components;
- The ability to support iOS and Android mobile platforms;
- Faster decision-making and lower organizational latency, as users can communicate more easily and quickly inside and outside of their organization;
- Improved and more consistent compliance and archiving capabilities for enterprise communications.
The major benefits are achieved by a close integration between Microsoft Exchange 2013, SharePoint 2013 and Lync 2013. Integration of these packages is imperative to achieve these benefits, and significantly changes the architectural approach and IT organization requirements to support UC 2013. Figure 2 below is a schematic of the major software and infrastructure components required in an integrated solution. This reference architecture supports 10,000 user seats.
The number of servers required to support 10,000 users for both UC 2010 and UC 2013 is shown in Table 2 below. It shows that UC 2013 requires significantly more virtual and physical servers than UC 2010, because of the increased integration and communication between the Exchange, SharePoint and Lync components.
The costs for Microsoft UC licenses are given in Table 3. These prices are not discounted for either UC 2010 or 2013. The overall pricing is very similar for both environments. The major cost is in the Client Access Licenses (CALs) which are directly related to the number of users registered on the systems.
The costs and estimated costs are shown in Table 4. These prices are not discounted, as there is no discount information available on the Microsoft website. Also not included on the Microsoft website is information about integration with on premise Active Directory and higher availability options for Office 365. The Wikibon estimates are based on interviews with enterprises that have deployed Office 365, but not based on actual known figures or information available on Microsoft's website. Wikibon would encourage feedback from Wikibon members (or Microsoft) on these additional charges.
The comparison metric used throughout this study is Discounted Total Cost/User/Month. The underlying model components are:-
- Server Hardware ($10,000) x n Sites (sometime overhead included, e.g., 15% for DAS)
- VNX Storage Arrays (10GB/User x 5 = 500TB), $1,000/ average 1TB drive, x n Sites
- Hardware Maintenance (18%, 4 years)
- Space, Power, Etc (4 years)
- Microsoft Licenses (see Table 3)
- Microsoft License Maintenance (18%, 4 years)
- Microsoft Office 365 Basic User Cost ($20/User/Month) (See Table 4)
- Microsoft Office 365 Integrated Additional HA Costs (equivalent 2 Sites) of $8/User/Month (See Table 4)
- Support (m staff @ $150,000, 4 years, m/2 Staff for Office 365)
- Help Desk (m staff @ $100,000, 4 years)
- Initial Deployment
The number are then divided by the number of users (10,000) x the number of month in the analysis (48). This represents the total cost per user per month.
This number needs to be discounted, as some solution components are initial investment heavy (e.g, Server Hardware), and others are spread out over the four years (e.g., . The components with "4 years" in the description are multiplied by a 5% discount factor over the four years. This discount factor is 90.46% for 4 years at 5%. The capital items are assumed to be acquired in the first month of the project.
The final metric is Discounted Total Cost/User/Month over four years using a 5% discount rate. This is a Net Present Cost (NPC) which adjusts the total cost for the time value of money.
As an example of this, the Microsoft Office 365 Basic User Cost is $20/User/Month over the 4 year analysis period. After discounting at 5% over the 4 years, the Discounted Microsoft Office 365 Basic User Cost is $20 x 90.46% = $18.1/User/Month.
DAS vs. Array for UC 2013
Wikibon has placed the Server Spaces functionality announced by Microsoft in Windows 2012 into a storage topology category called Server SAN. Server SAN is an interesting and very viable long-term development, which will probably replace traditional SAN for high performance workloads addressing active data over the next decade. For all the early investors in this space (some of the larger players are Microsoft Storage Spaces, EMC’s ScaleiO, and VMware’s vSAN), it is very early days. As a result the model is currently ready for low performance, low stress environments, where high availability and high functionality are not a priority. Much greater functionality and better management tools are required for Storage Spaces to be viable for UC 2013.
Exchange 2013 has developed its own high availability functionality with its Data Availability Groups (DAGs). For small deployments of Exchange-only seats, it could be a viable strategy in the next few years. However, UC 2013 is a combination of applications including SharePoint and Lync, that do not have the same built-in high-availability application function, but rather share access to Microsoft SQLServer databases as well as integration with Active Directory. For this architecture (illustrated in Figure 2 above) the traditional storage array offers far higher availability features and far more robust management and automation features, which work well with current fail-over capabilities.
Figure 3 shows that for a UC2013 environment with 10,000 users, DAS has over 12% higher costs over four years. It will cost more to implement and maintain, will be less available (at least in the first two years) and is a far riskier product choice. The potential hardware saving are minuscule compared with the higher costs and much higher risks.
Wikibon strongly recommends the adoption of Tier-2 traditional array technology for the implementation of Microsoft Unified Communications 2013.
IT Costs of UC 2013 vs. UC 2010
Tables Footnote-1 through 3 in the Footnotes show the detailed calculations of the server resources required for UC 2010 and UC 2013. A summary of the total virtual and physical servers required, together with memory, are shown in Table 2 above. This is the main source of difference in cost between UC 2010 and UC 2013, with the latter requiring about an additional 50% in server resources. Figure 4 shows an overall ~8% difference in discounted total cost of UC 2010 and UC 2013. Figure 9 in the Footnotes gives the detailed breakdown.
Table 5 shows a detailed financial case which compare the total costs of UC 2010 and UC 2013, and also includes the value of the increased productivity from UC 2013. The business productivity assumptions for UC 2013 are enumerated in Table Footnote-5. A key metric is the improved productivity of the 10,000 end-users, which is estimated as 5% for the time they are actively using Unified Communications (about 10% of the time). The overall improvement in productivity is assessed as 0.5%.
The financial metrics for this analysis are given at the bottom of Table 5. The NPV is over $12 million, break-even is less than 4 months, and ROI and IRR are over 300%. These metrics show that implementing UC 2013 is a no-brainer business decision.
One technique for determining the sensitivity of the business case is to calculate the productivity improvement break-even point, the amount of improvement that will make the IRR (Internal Rate of Return) equal zero. This is only less than 0.5% of time saved while the end-users are actively using Microsoft Unified Communications 2013, or 0.05% of total time. That is equivalent to a saving of 14 seconds/day!
Based on the above analysis, and the detailed interviews with end-users, Wikibon unreservedly recommends moving to Microsoft Unified Communications 2013 as quickly as possible.
Comparing UC 2013 vs. Office 365 across Standard, HA and Very HA Environments
On-site UC 2013 and Office 365 are functionally similar. Additional costs are required for HA Office 365 configurations and for integrating Office 365 into existing Active Directory networks. Significant on-site support is still required for Office 365.
Figures 5,6 & 7 below show that for 1 site, 2 site & 3 site implementations with 10,000 users on-site converged implementations of UC 2013 are always significantly lower cost than Office 365.
Office 365 is a good unified communication cloud service, which offers all the same productivity improvement of UC 2013. Wikibon added the cost of additional resources needed to monitor the Office 365 service, integrate it into other enterprise services, and provide the levels of availability enterprises expect in order to make a fair comparison with UC 2013. In addition, an in-house service will almost always offer better user response times that external services, which yields better end-user productivity. When this comparison is made, the usual finding that renting is more expensive than owning is confirmed.
UC 2013 Array vs. Office 365 for Range of User Seats
Figure 8 below shows the cost curve for 100 seats, 1,000 seats, 10,000 seats and 100,000 seats. As the numbers decrease, the cost case for Office 365 improves, as expected.
The analysis shows that in-house UC 2013 is likely to be the lowest cost option, whenever the number of seats exceeds 300.
Usually it is easier to improve response time for a locally implemented UC 2013 system that cloud based systems. This will increase productivity significantly. The methodology to justify lower response time is provided in earlier Wikibon research, Figure 1 in a Case Study about Revere.
For medium sized companies with CAPEX investment constraints that have OPEX budgets, Office 365 may be attractive. Office 365 is currently not a viable option for larger enterprises. There may well be individual locations or groups of employees where outsourcing to Office 365 makes sense. In general, however, these groups should have little interaction with the rest of the organization.
Conclusions & Recommendations
Wikibon's conclusions are:
- Microsoft UC 2013 is a significant enhancement, and the business case for installation is overwhelming in most cases. Wikibon's research shows that the likely improvement in user productivity while actively using UC 2013 is 5%. Using the assumption that average active usage of UC is about 10%, migrating to UC 2013 has an ROI of >300% and a break-even of <4 months. The break-even for using UC 2013 only requires a 0.5% improvement in productivity - equivalent to an increase of 0.05% in overall productivity (or 14 seconds a day). Table 1 below describes the details. Given that Office 365 uses UC 2013, there will be significant line-of-business pressure to move to Office 365 for productivity reasons if IT drags its feet migrating to UC 2013.
- One of the possible reasons for IT prevarication is the fact that UC 2013 takes significantly more server and memory resources (50%), and overall will cost about 10% more per UC 2013 seat. Wikibon research shows the integration functionality is well worth the additional IT cost.
- Wikibon's research shows clearly that a consolidated and integrated approach to UC 2013 is significantly better than the alternatives and the only way to achieve the user productivity savings we outlined.
- With the integration of all three packages, and the requirement to integrate with other services such as Active Directory, Wikibon believes that virtualization of UC 2013 is best practice. Our research further leads us to believe that Microsoft's virtualization engine, Hyper-V, together with Systems Center, is sufficiently robust to be a component of an integrated UC solution.
- Microsoft Exchange provides its own DAG high availability architecture. Wikibon's research previous research shows it is reasonable at low seat counts to use lower cost Direct DAS. However, neither SharePoint 2013 or Lync 2013 have the same built-in high availability design, and both use Microsoft SQL Server database. Wikibon believes that Server SAN is a viable future model of storage and system design, and that Microsoft's Storage Spaces software could become a major player in this fast growing market. However, our research also strongly indicates that Microsoft's Storage Spaces does not have the functionality or management tools to provide a reliable storage foundation for UC 2013. Wikibon also found that traditional arrays were still just cheaper than DAS (see Figure 3 below for details). As a result, Wikibon strongly recommends using traditional array technology for UC 2013 for most user counts. At the very low-end, Office 365 is likely to be a cheaper alternative to using an in-house DAS-based solutions.
- Wikibon's research finds that there are significant additional costs for integrating Office 365 into Active Directory, including monitoring the Office 365 service and for implementing high availability solutions. Our research shows that Office 365 is significantly more expensive than in-house UC when the number of seats exceeds 300. Figure 1 below shows a summary of the findings, and Figures 5, 6 & 7 below show the details.
As a result, Wikibon believes that existing deployers of Exchange with or without SharePoint and/or Lync should focus on implementing a full-function integration of UC 2013 as quickly as possible. They should enable and document the user productivity benefits, and avoid individual departments having to split away with Office 365 to obtain the end-user productivity benefits. The potential for IT to shoot itself in the foot by worrying about the overheads of UC 2013 application integration or entering a DAS/Array debate have never been greater. There is a clear need to present a clear unified communications strategy, with a clear project plan for rapid adoption, and a clear mandate for senior management to just get it done – in 2014.
Action Item: CIO and senior user communication executives using Microsoft email and other end-user software should embrace Microsoft UC 2013, and beat a rapid path to implementation, either with Office 365 or on-site services. On-site implementations should use a converged infrastructure approach to implement Exchange, SharePoint and Lync 2013 as an integrated set of user services. If necessary, IT and end-user organizations should be adapted to embrace Microsoft Unified Communication.
These footnote contain the detailed Tables which source the Figures and Tables in the main sections.