Office 365 vs. Third Party Hosted Exchange

Small and medium-sized businesses are certainly not without options in regard to how they manage their documents, store their files, access word processing applications, internally communicate, and send emails. As an IT Managed Services Provider, the question has recently been raised as to whether small and medium-sized businesses should choose Office 365 or Hosted Exchange.

What is a Third Party Hosted Exchange?

Hosted Exchange basically means renting an off-site sever in a secure location that will enable office processes to occur on-site. As Hosted Exchange is a Microsoft product, businesses can utilize it with Microsoft applications and services, such as Outlook and SharePoint to enable efficient collaboration and a remote workforce.

What is Office 365?

Office 365 provides an integrated cloud-based solution with several features, such as Microsoft Teams , which supports internal office communication through instant messaging and cloud sharing, and both web-based and traditional Microsoft Office Outlook.

IT Management and Control

Office 365 email solutions provide built in updates. With Exchange, the burden of performing security updates rests on the shoulders of your IT department. This can also require downtime, which isn’t the case with Office 365 updates.

With Microsoft Exchange Server, you (or your IT MSP) are in full control of the hardware and infrastructure. Office 365 does not have direct access to this. The difference can impact on the level of control you have over configuration, upgrades and system changes.


The scalability and flexibility that comes with Office 365 allows you to increase or decrease the email storage you require from month to month. Compared to the onsite servers, time and money are needed first to set up servers. Cloud-based email prevents this expenditure and makes global expansion more attainable.


Physical equipment like servers and switches can be expensive and require floor space. There are also ongoing variable costs associated such as power consumption, support contracts to maintain the equipment, and reconfiguring needs every few years.

With Office 365, this is taken care of as part of the subscription. Whereas Exchange Server can be cost-effective for a larger enterprise with resources and infrastructure at their disposal, for SMEs it is often more budget and cashflow-friendly to choose the SaaS model of Office 365.

Backup and Disaster Recovery

One important thing to remember is the cost of backing up your Office 365 data. Having only 30 days of backup emails with Office 365, a third-party backup solution is required. However, by backing up your valuable assets online, you can easily access all the information you need should your on-premise replications face a disaster. This is a key advantage of Office 365 over Microsoft Exchange – if there’s a fire or theft at your offices, you’ll have to pick up the pieces yourself.

When choosing between Office 365 and Hosted Exchange, there are countless factors that a small or medium-sized business need to recognize. As these businesses often face more limited resources, a restricted budget may lead them towards the Office 365 option.

Want more information about your options? Contact us today to speak with an Office 365 expert for your cloud backup and security needs.

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