Microsoft dominates India's $77.8 million enterprise email market: Study

The way enterprises use email seems set for a radical change in the near future. A study conducted by  analytics service firm Ascentius shows that the total revenue across on-premise, hosted and cloud-based email and collaboration platforms/services is estimated to grow to $111 million by 2015 from the $77.8 million in 2012, a compound annual growth rate of 12.6 per cent. However, during the same period on-premise licence revenue will decline from 81 to 73 per cent of the market, while public cloud-based solutions will grow from 13 to 19 per cent.

The study, 'Evolving Market for Email & Collaboration Platform in India', shows that while adoption of email seems to be ubiquitous across large, medium and small enterprises, there are major disparities when it comes to adoption of other technologies like shared calendars and tele or web conferencing.

It shows that due to the high upfront costs attached to email platforms, cost effectiveness is the most important factor for Indian companies while choosing an email and collaboration platform. The incumbency factor came next, primarily due to past investments in platform and familiarity with a certain user interface.

The study says that the on-premise email and collaboration platform market is reaching its maturity state in India. The $62.8 million market in 2012 is predicted to grow at 9 per cent CAGR over the next three years mostly due to replacement and upgradation, organic growth in number of employees, drop in piracy rates and investments in unified communication.

With 78 per cent market share, Microsoft with its Exchange Server platform is the largest vendor in on-premise email platform for 2012. IBM Lotus Notes comes a distant second at 16 per cent. While older players like Novell seems to be losing their edge, the relatively new Zimbra has secured a one per cent share due to "active selling", says the study. However, pirated software still accounts for about 25 per cent of the segment.

Hosted email services has not really taken off and account for just $5 million in 2012. It is expected to have a CAGR of 21 per cent till 2015 due to the lower operational costs and usage based pricing model. Plus, this model brings in a predictability of costs and the ability to bypass the complexities. Due to these factors, smaller enterprises are the first to adopt the new model. Large enterprises will be held back due to the large investments made by them on messaging platforms. Small enterprises account for 55 per cent of the present market revenue. The study says that multiple points of failure, frequent outages and the inability of service providers to meet the service level agreement is holding back the growth of these services.

Meanwhile, public cloud email services achieved revenues of $10 million in 2012 and is expected to grow at a CAGR of 27 per cent for the next three years. The study found that public cloud email market is likely to grow at the cost of hosted email services and not on-premise email. Significantly, there is only 20 per cent adoption by large enterprises in this space.

The study claims Microsoft Office365 has a 70 per cent market share in the public cloud email and collaboration services market "pro-incumbency advantage". Google Apps, on the other hand, has the entire residue of 29 per cent due to the "first mover advantage". However, the study says that while Google Apps wanted to carve a niche in the large enterprise space, it is finding greatest traction coming from SMB's and SME's businesses space.

"The Indian IT markets are manifesting strong incumbency advantages. Microsoft's residual leadership on the desktop market with Microsoft Office & Outlook has directly translated into leadership for the online version of Office 365. The familiarity of user interface and the commonality of features between the desktop and online version has been a strong driver for dominance of Office 365," explained Alok Shende, Principal Analyst & Founder Director, Ascentius. He said the Indian market is not yet ready for 100 per cent cloud based offerings, particularly when users expect intensive interactivity and high usage with the office productivity applications.

"There are no free enterprise class public cloud based email services available in the market. An outlook.com or gmail.com are not enterprise class and they pose a challenge in commercial and financial dealings with customers and suppliers since there is no mechanism to authenticate the identity of the user or enterprise. And without trust and identity, the very essence of substantiality that business emails provide is negated," Shende added.