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CIO's cost-cutting measures include move to Gmail

The recession has CIOs scrambling to contain costs any way they can. Midmarket appliance maker Hamilton Beach found a way to save $1 million: Gmail.

When Jerry Hodge's capital IT budget request for 2009 was slashed by two-thirds, the senior director of IT at Hamilton Beach joined the ranks of IT executives pursuing creative cost-cutting measures. His ace in the cloud: an initiative, two years in the making, to replace on-premise email with Google Inc.'s Gmail.

The move from IBM Lotus Version 8 to the enterprise edition of Gmail will save nearly $1 million over five years, due largely to the costs associated with a mandatory Lotus upgrade for Hamilton Beach Brands Inc. this year. The migration starts this month.

"This year we're looking for ways to do more with the same dollars," said Hodge, whose $2.1 million capital request was sliced down to $700,000.

Hodge is hardly alone in exploring new email models as a cost-cutting measure. A survey of 53 firms by Forrester Research Inc. showed that 36 are considering or have considered a change in their email delivery. Cost was the primary trigger for 15 companies, while a vendor switch or upgrade was the prime mover for 13. Seven of the 36 said they plan to outsource email to the cloud and 20 plan to use a hybrid model, keeping mailbox servers on premise and running other applications, like inbound email spam, as a cloud-based service.

Enterprise Gmail for $50 per user, per year

February marks the second anniversary of Google Apps Premier Edition, the beefed-up version of the free Google Apps hosted service launched in 2002 that revolutionized consumer email. For $50 per user per year, the premier edition offers "businesses of all sizes" a communication and collaboration suite of applications that includes Gmail webmail, shared calendaring, Google docs, instant messaging and Voice over Internet Protocol service. But two years in, very few enterprises have made a big commitment to use Google docs as a replacement for Microsoft Office or similar tools, said analyst Tom Austin.

"In fact, I can't think of one, to be honest," said Austin, who follows cloud computing at Stamford, Conn.-based Gartner Inc.

But Gmail itself is a game changer. "It's very clear to us that there is a new world order out there when it comes to email," Austin said.

"They have built a phenomenally scalable, dramatically new class of infrastructure and application technology for delivering email and Web search and a whole lot of other stuff to hundreds of millions, if not billons, of people at a cost level that is dramatically lower than anything that can be accomplished using the kind of technology that Microsoft sells as Exchange," Austin said.

No new hardware expenditure

For Hamilton Beach, the financial argument for outsourcing email to the cloud was compelling. Two years ago, Hodge had his infrastructure team start evaluating email options, after IBM/Lotus announced it was sunsetting support for version 6.5.3 of IBM Lotus Notes in the first half of 2009.

"Of course the initial response was, 'Oh my God, I'm going to work myself out of a job," he recalled. But Hodge, who has an MBA and a penchant for technology models that do stuff better (he was an early adopter of virtualization), kept nudging. "I said, 'Guys we're spending a lot of time babysitting something that is not bringing us a competitive advantage.'"

To stay with IBM Lotus would mean, minimum, buying several servers (iSeries or Wintel) for Hamilton Beach field offices, Hodge said, and it took six IT people to maintain different parts of the Lotus system (the equivalent of one full-time employee a year). With Gmail, "I could redeploy those 2,000 hours over the year for other strategic projects," he said.

Other benefits: Google spends more on security than he ever could. Google's spam filter from Postini did a better job than his. He would not have to worry about storage. The archiving feature fit into the company's records retention policy. As for availability, his team took down email once a month for maintenance, so Gmail would likely be up more, too.

Hodge's team calculates that moving off Lotus Notes to Gmail will save about $500,000 in capital and operating costs over five years, and another $400,000 in labor. And that includes switching out the company's Palm Treos for BlackBerry smartphones, which sync up with Gmail.

"It made it a real easy decision which way we wanted to go," Hodge said. "But we didn't want to take anything away from the business."

How Hodge evaluated Gmail, plus:
No more folders

Before doing a detailed side-by-side comparison with Lotus and other programs, Hodge's team surveyed segments of the workplace to gauge resistance to moving from Lotus (not strong) and document which email capabilities were must-haves. He bought test accounts from Google to try out Gmail and learn its capabilities.

"Probably the biggest feature [change] is that Google uses labels on their emails, where in Lotus Notes you have folders," Hodge said. Gmail allows users to tag emails with multiple labels and rely on Google search to retrieve them, arguably making it easier to track information. But Hodge is mindful that the change will be "daunting for some," so he factored in training costs to "account for that least common denominator."

Not a fan of big-bang implementations, Hodge is starting slow. IT staff at headquarters and remote locations, including China and Mexico City, piloted the program to work out the kinks. The company migration will be rolled out in phases, starting with "friendlies," and ending with top executives. The new Gmail accounts will continue to be integrated with Lotus Notes until the rollout is complete. The address will still be

Hodge's process hews closely to advice from Cambridge, Mass.-based Forrester on analyzing the costs of on-premise email vs. cloud-based alternatives. Analyst Ted Schadler recommends that you first segment your workforce (e.g., mobile execs, information workers, occasional users) to determine each group's email needs, then calculate the "fully loaded" cost of email -- including costs that live outside of the IT budget -- before doing a side-by-side comparison.

Let us know what you think about the story; email Linda Tucci, Senior News Writer.

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