Should I Build or Should I Buy? Understanding Email Infrastructure in the Cloud

The decision to move email to the cloud can be complex for organizations who want to streamline email operational costs, yet maintain control over their own email architecture. As email is deeply woven into the fabric of most organizations including marketing, customer service, finance, human resources, and corporate departments, finding the right solution that supports the entire organization is a prime challenge with a large sphere of influence in the buying process.

The increasing complexity that comes from the growth of email has sparked the rise of hosted email solutions that solve the challenges faced by development teams charged with managing costs. The Q4 2010 Forrsights Budget and Tracker Priorities Survey found that 59% of Global IT executives and technology decision makers said that growing overall company revenue was their top priority while another 54% said lowering the firm’s operating expenses was their priority. To that end, 45% said that they would actively pursue the usage of a cloud based infrastructure to aid in those efforts.

However, the trend to move towards the cloud does not end with the enterprise. While some enterprise buyers are holding out due to the sheer size and complexity of their systems, the desire for on-demand services that are flexible and scalable based on need has found significant traction among mid-market buyers, particularly start-ups and SMBs who build systems that are cloud-ready. 62% of SMBs have embraced cloud services, up 48% from the first half of 2012. That number is expected to jump to 73% by early 2013, but although their IT budgets are on the rise, only 26% plan to hire IT staff – a decrease of 31% a year ago.

“Email operations is integral to the success of our “We’re more effective than before…It didn’t make business, but it’s not an area in which we want to sense to hire ten email developer gurus, or to dedicate an extraordinary amount of time, money build a datacenter. Email is just a building block and resources. My previous experience with the that needs to be in place. I hadn’t yet built out a challenges of managing in-house servers and deliver- complex email system, but now I’ve got one, and ability highlighted the need to employ outsourced it’s cheap…reduced our team’s cognitive load mail services focused solely on the delivery of our and made it easier to scale hardware...We’re a messages right from the start.” Craig Bloem, higher-functioning company as a result.” Loren Founder and CEO, FreeLogoServices.com Norman, Lead developer at Scoutmob

Today, IT professionals must analyze the pros and cons of building and maintaining their own systems versus outsourcing some or all of their email operations to a third party provider.

1Spiceworks, State of SMB IT 2H 2012, http://itreports.spiceworks.com/reports/spiceworks_voice_of_it_state_of_smb_2h_2012.pdf

Should I Build or Should I Buy sendgrid.com p2 Source: Spiceworks State of SMB IT, 2H 2012 The Challenges of Email

No longer a simple medium by which to send one-to-one communications, email now powers the communication for a series of functions and departments throughout an organization, and is relied upon (far more than any other means like telephone or traditional mailed correspondence) to relay critical information across millions of miles in an instant.

Given this, the role of the developer now requires specialties in various aspects of email operations and for new, ever-changing processes to be built that will compensate for the organization’s reliance and usage of email. However, the day-to-day management of email can be a tedious, time-consuming effort whose impact is often overlooked by management. Without executive sponsorship it’s hard to support the broader business objectives of the organization to build revenue generating products. Here’s why:

Email is a constant work in progress. As a company grows and becomes more successful, the more critical email becomes to your organization to drive additional growth and reach subscribers. And with increased usage comes new challenges in maintenance, delivery and scalability. These three components keep development on its toes, constantly trying to solve issues to maintain up-time, reliability and consistency as email frequency increases at rapid rates. As such, email becomes a very resource intensive operation requiring dedicated personnel, specialized expertise and a monetary commitment to grow and expand.

• Email has many partners. Technology’s growth spurt in the SaaS industry has given way to a number of tools designed to simplify processes and provide access to data more quickly and easily. These email or email dependent providers (CRM’s, MAP, etc.) and other platforms have given rise to a new area of concern – integration. Many of these tools also rely on email to power their systems, but their systems are reliant on you being able to integrate them into your current infrastructure. As a result, development has a new role as an email integration specialist – charged with streamlining and creating efficiencies between multiple platforms utilized by organizational departments wanting to improve results and drive efficiency. These include directories, applications, mobile, security, collaboration tools like team workspaces and web conferencing, and more.

Should I Build or Should I Buy sendgrid.com p3 • Email needs to be protected. Email can easily be spoofed which can be a constant battle for developers and marketers who struggle to protect their brand by false claims in malicious email and other criminal activity. Companies need access to tools and services that will help protect their name, brand and reputation. As a result, email authentication through SPF, DKIM and DMARC now becomes imperative to prove and protect your identity. By doing so, ISPs can better identify spammers and prevent malicious email from invading consumer inboxes and destroying trust in your brand.

• Email needs to be responsive. As with email security, rapid deployment of upgrades and migrations are happening at a faster clip than in the past. Development has been charged with designing and executing processes that provide access to the latest and greatest as quickly as possible. Additionally, email ties back to a number of operational functions, particularly in transactional email where customers expect rapid communications in response to an action they complete. As these communications become more pervasive and expansive in quantity and nature, email must respond to marketplace changes and continue to deliver on customer expectations despite internal challenges.

• Email experts are needed. With these expanding roles, specializations are emerging in the area of delivery, analysis and security to handle the growing complexities of the email landscape. Furthermore, the time that is needed to handle email operations has grown considerably. Organizations that do not have established email experts on staff pull on their own engineering and development resources to fill the gap. As a result, more time is spent managing email and less time is spent on product development and business objectives.

• Email costs are changing. Due to the above factors, the cost of maintaining in-house systems has skyrocketed causing developers to seek out hybrid or SasS solutions to cut costs. By outsourcing some or all of their email operations, organizations can see significant savings, thereby increasing market demand and creating an interesting niche for smart companies that fill this need. And while larger organizations usually opt to maintain greater control of their internal systems using more traditional methods, SMBs and startups who are laser focused on rapid profitability opt for outsourced solutions that won’t tax their internal resources.

Case Study: CYFE

Cloud email proved to be faster and more cost effective than building an on-premise solution.

Cyfe launched in January 2012 and quickly acquired over 5,000 active users. Their rapid growth exposed some challenges with their current email system which they needed to remedy quickly. They decided to build their own email system, but in order to do so, Cyfe would have to assign key resources away from product development and direct them towards email management, not to mention the months it would take to actually build their own system.

As a result, they put their build plans on hold to explore cloud based email solutions. When they compared the cost of using a third party provider to building their own on-premise infrastructure, they found that building would cost them twice as much as using a cloud based provider including the countless man hours in maintenance and loss of productivity amongst their small engineering team.

They realized what they really needed was an outsourced solution that could easily scale with their business, do all the heavy lifting and allow them to focus on enhancing their web application. By employing SendGrid’s cloud based email platform, Cyfe was able to integrate in a matter of hours and provide an email infrastructure that is fully scalable and operates independently without taxing their internal resources.

2 FireEye,Inc, FireEye Advanced Threat Report – 1H 2012, , http://www.fireeye.com/resources/pdfs/fireeye-advanced-threat-report-1h2012.pdf

Should I Build or Should I Buy sendgrid.com p4 Outsourcing Email Operations

Outsourcing email operations to a third-party provider in whole or in part is trending upwards, particularly for organizations that want to focus their development resources on product development rather than email management. No longer can they afford to dedicate valuable engineering resources to the care and feeding of email – a task that requires expertise in a variety of areas from security and deliverability to compliance and maintenance. Because of these pressures, development teams require solutions to relieve them of cost, complexities and associated redundancies inherent with on-premise email management. As a result of these industry pressures, cloud email was projected to grow by 36% in 2012 with current satisfaction levels topping out at 96%. Today, Gartner forecasts overall cloud growth to reach $10.5 billion in 2014.

SMBs tend to be faster adopters of cloud based services. 42% migrated to the cloud in the 2nd half of 2012 with another 6% planning to do so in the first half of 2013. This is because cloud based solutions provide them with quick access to enterprise class tools at affordable pricing. And with email being a primary tool of communication, SMBs want to the benefits of email messaging without the headaches of managing it. SendGrid’s massive growth from the time it opened its doors in 2009 tells the whole story. In 2009, SendGrid started with 1,000 customers and today has over 60,000 customers who together are sending over 400 million transactional emails per day.

No matter the size or history of the organization, aside from cost, there are three key elements organizations should review when evaluating your outsourcing options.

People: Many companies are opting for fully outsourced or hybrid solutions. Consider the affect (positive and negative) that outsourcing will have on your personnel. While cloud based infrastructures can eliminate redundancies and free up developer workload, it may also require a new skill – vendor management. Consider how your new found efficiencies will affect day-to-day operations and how you may have to restructure your internal organization to optimize the opportunity. When evaluating a vendor, pay close attention to their customer support options to determine availability and level of access.

Process: Evaluate how your business process will change based on migrating to a cloud based email infrastructure. Consider the effect the migration will have on dependent systems and how you will need to integrate or divorce your systems from your new solution if necessary. Do a thorough assessment of their API libraries and documentation to ensure you will have the tools necessary to optimize the platform to your business needs.

Technology: Thoroughly evaluate vendor capabilities in terms of platform usage and support. Identify which systems you’ll want the platform to integrate with and if possible, give it a test run. Also check out long term viability, reliability and responsiveness. Ask for customer references for clients in your industry or with similar needs as part of your vetting process.

3James Hay, Cloud Adoption Trends 2012, http://www.slideshare.net/Fasthosts/cloud-adoption-trends-2012 (May 17, 2012) 4Spiceworks, The Spiceworks Cloud Barometer Report, http://pages.spiceworks.com/rs/spiceworksinc/images/Spiceworks-Cloud-Barometer-Report.pdf (July 2012)

Should I Build or Should I Buy sendgrid.com p5 The Cost of Email Management

Many organizations underestimate the true cost of maintaining their own email infrastructure. This is because performing a cost analysis can be complex when you add in all the elements that make up the total cost per user. These include:

Email hardware and software: For on-premise email management, organizations incur front loaded costs for hardware and software purchases for mail servers, client software, filtering and more. When calculating this number, be sure to add in licenses (even if bundled into other packages), upgrades and ongoing maintenance that include power, facility costs and overall operating expenses. Also, include financing costs if your company borrowed money to secure the equipment and chargeback from tools and services shared across departments.

Staff: The number of people required to support ALL aspects of your email service must be calculated into your total cost. This includes IT professionals, email operations, email deliverability, and marketing. Much like bundled services, this category also includes the people that may only support your email in a peripheral sense such as customer service agents or help desks.

Email deliverability: With 20% of email going undelivered, the cost of maintaining your own email infrastructure has ROI implications for your email program as well as a trickledown effect from an internal resource management perspective. Poor email deliverability reduces revenue, increases customer service/call center inquiries and forces reallocation of engineering resources to troubleshoot and fix ongoing deliverability problems. Factor in the loss of revenue, additional engineering time, and potentially the need to hire deliverability specialists to handle ISP mediation.

Integration and scalability: Oftentimes on-premise systems are not built to quickly scale with volume or adapt to newer technologies with ease. As a result, companies lag behind while they spend development lifecycles trying to integrate and upgrade their own infrastructure – a process that can take months depending on the system. Given this, include the cost of ongoing builds and system maintenance. Alternatively, cloud based systems can easily scale down making it ideal for situations where applications only need to be deployed for a short period of time. In this case, organizations can save by choosing a solution that is well suited for limited engagements, but can also remain nimble enough for rapid change.

Data and energy: Cloud based services include things like power, cooling, facilities charges and bandwidth in their fees. Make sure you calculate bandwidth costs, which is typically done in $/Mbps and determine your energy cost per server in order to make a fair comparison.

The Benefits of Cloud Based Email

Many organizations start off with their own custom systems, but as usage increases, expenses increase, and developers are not only charged with building a great application, but also to do so in the most cost effective manner possible. Consequently, more and more companies are seeking cloud based solutions that benefit the bottom line. This is especially true for small to medium sized companies who send thousands to millions of emails per month, yet don’t have the resources to hire in-house staff to maintain their own systems.

The CIO Global Cloud Computing Adoption Survey revealed that key drivers of cloud adoption are business agility, infrastructure cost reduction, reduction in IT management and resources, increased capacity and increased productivity, but security still serves as a gating factor when making the move to a SaaS solution. However, trust is growing between developers and their vendors. In fact, despite security concerns, 82% of U.S companies trust the cloud enough to use it. 5

5 Thor Oswald, Dan Muse. How Secure Is the Cloud? IT Pros Speak Up, http://www.cio.com/article/703064/How_Secure_Is_the_Cloud_IT_Pros_Speak_Up (March 28, 2012)

Should I Build or Should I Buy sendgrid.com p6 Should I Build or Should I Buy sendgrid.com p7 For SMBs, cloud adoption has fewer barriers. These businesses cite simple installation, minimal configuration, on-demand everywhere availability, and integrated web-based data backup. Additionally, total cost of ownership, and automated feature and functionality upgrades make cloud applications favored options for this group. In fact, 38% of SMBs have improved operational efficiency and 39% improved employee productivity with cloud adoption.

To that end, cloud based email provides the following advantages:

Better cost control. Cloud based services offer pay-as-you-go models that allow you to better manage costs and ramp up based on actual need rather than projected need. Therefore, instead of incurring the upfront capital expense of purchasing hardware and software, not to mention financing said equipment, you can simply pay for what you need now and increase your usage as your email needs expand. In this way, companies can better track their ongoing operational expenses and realize savings almost immediately.

Rapid implementation and maintenance. Hosted email provides the unique ability to initiate upgrades and configure software from a central point that can be deployed system wide. This eliminates the usual headaches faced by developers trying to update software and protect their networks from spam, viruses and other malicious email. Additionally, migrations become easier when using a central access point thereby saving an extraordinary amount of time and development resources.

Access to email deliverability experts. When outsourcing your email to a reputable provider, you get a team of individuals who are wholly focused on maintaining and supporting your email infrastructure. This type of expertise would be hard to find and expensive to hire for organizations trying to duplicate the knowledge base found in external, focused teams of specialists.

Greater flexibility.Cloud based service models provide plenty of room for steady or rapid growth. Companies who do not want to be hampered by the inherent limitations of maintaining and enhancing their own systems can turn to cloud based providers for nimbleness and flexibility. This is especially important for organizations that need to respond rapidly to marketplace changes.

Better use of internal expertise. By outsourcing email operations, development teams can focus on building better products and protecting their networks, rather than worrying about email infrastructure and email deliverability issues. This leads to increased productivity and output built around the strategic objectives of the business, and higher morale amongst employees who want to work on impactful projects.

Drive new revenue. Outsourcing to a cloud based provider enables companies to think outside of their own box. No longer hampered by “SendGrid’s flexible APIs provided the long development cycles, they can leverage their vendors in new ways tools to integrate our two platforms to simplify processes, allowing developers to design new services in a way that protected our custom- that can drive revenue for the business. Whitelabeling is a common ers’ private information and ensured tactic, but with flexible APIs, extended integration provides endless maximum email handling. With Send- possibilities. Grid, we were able to bring our prod- uct enhancements to market faster, Real-time analytics. Cloud based services can provide a level of and achieve our goal of creating a business intelligence that would be hard to glean from internal reports. tool that helps partners and sponsors Oftentimes, systems are built without foresight into the extraction and maximize ROI. - David Stys, SVP of interpretation of data – particularly from a user friendly perspective. Product Development, Turnkey Cloud based solutions will work to perfect their analytical tools to showcase the value you are receiving from their platform. They not only provide canned reports, but also allow for easy customization to suit your business needs.

6 CloudTweaks, SaaS Business Apps Drive SMB Cloud Computing Adoption (May 2, 2012) 7 Dell and ThechAisle, The SMB Cloud Application Trends Survey, (March 2012)

Should I Build or Should I Buy sendgrid.com p8 Case Study: Pinterest

Outsourcing provided Pinterest with the space to focus on strategic plans, rather than day-to-day email management.

Recently named by Fortune Magazine as one of the fastest growing websites of all time, Pinterest relies on email as a critical communication tool to drive user engagement. As a result of their rapid growth, Pinterest’s small team of engineers were left with the task of managing the flow of millions of emails per month through their systems, and the deliverability challenges that accompany high volume sending.

While their engineers were capable of tracking down these issues, their mandate was to strategically grow their operational systems – not manage the day-to-day flow of email. They needed a solution that could focus on deliverability while they continued to improve the value of their app. As a result, they outsourced their email operations to SendGrid, a cloud based email infrastructure platform.

Today, their engineering team no longer worries about email delivery. Instead, they rely on SendGrid’s email expertise to monitor their deliverability and resolve delivery failures with their limited involvement.

A Comparative Snapshot

When deciding whether to build your own on-premise email infrastructure versus outsourcing it to a third-party provider, it’s important to identify the resources required to implement each solution. While there are many elements of setting up an email server, the checklist below provides an overview of the differences between options. By focusing on this critical component of any email program – the delivery of email messages to your subscribers – you can make informed decisions on how each solution will impact your staffing resources, development timelines and bottom line.

Setting Up Your Own Email Infrastructure Using SendGrid’s Email Infrastructure

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Should I Build or Should I Buy sendgrid.com p10 Making the Right Choice

Whether you have your email architecture already established or are thinking about building your own system from scratch, be sure to follow these key steps in order to determine which method is right for your organization.

1. Determine the true cost of maintaining your own email infrastructure. Take into account both the hard and soft costs of email operations including hardware, software, financing, staffing, storage, archiving, filtering, and mobile. Don’t forget to identify the trickle effect email operations may have on other departments such as customer service.

2. Outline your requirements and research reputable providers. Ascertain whether a hosted support solution can help streamline costs, but then expand your thinking to identify whether moving to a fully hosted email solution will better serve your long term interests.

3. Compare your on-premise costs with that of the SaaS provider. Many publish their pricing plans on their website or provide custom solutions for high volume senders. For example, SendGrid has a pricing calculator to help you figure out the right plan for you and allow you to better project your long term operational costs.

4. Get customer feedback. Read customer testimonials and case studies, and ask for references in your industry. Finding out the satisfaction levels of long term customers can go a long way in influencing the final decision amongst your colleagues.

Summary SendGrid is Email Delivery. Simplified.

SendGrid’s cloud-based email infrastructure relieves businesses of the cost and complexity of maintaining custom email systems. SendGrid replaces your email infrastructure so you don’t have to build, scale, and maintain these systems in-house. We provide reliable delivery, scalability and real-time analytics along with flexible APIs that make custom integration a breeze.

Our infrastructure is ready to scale and meet the demand at any moment, thereby eliminating your email headaches so that you can focus on your core product and meet the email demands of your business. We currently send over 6 billion emails per month for over 70,000 web application companies and developers including Foursquare, Pinterest, Airbnb, Twilio, Spotify and Pandora. So, whether you’re sending 100 emails or billions of emails, save time, resources, and money by focusing your engineering resources on your business and leave the technical work to SendGrid.

For more information about SendGrid, visit www.sendgrid.com

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