Competing against FREE

Friend of mine sells hosted Microsoft Exchange email, they promote various plans but aim to get subscriber revenue of about $15 a month. FIFTEEN DOLLARS a month for email, I thought, that seems expensive? For a 30 person company this works out to be $5,400 a year in costs. I couldn’t imagine that running an email system could possibly be all that expensive, they must be making huge money.

Our little firm is using Google Mail. Google actually hosts our domain, provides a familiar web interface, we use Microsoft Outlook as our client and it works fine with Blackberry and other mobile devices. I didn’t call anyone to set it up, just signed up on the web site and that was it. We also get basic virus protection, but most of us run a scanner on our computers as well. Best of all is the price — $0 (annual or monthly).

I asked my friend how he could compete with FREE. Obviously, this was the wrong question, he exploded in a fit of raging explaining that FREE wasn’t a business model and that he provided service and support and that people expected service and support. I decided to add a bit of fuel by remarking that he seemed to spend a fair chunk of his time working on reducing his support costs and in fact discouraging people from using their “service and support”. Obviously this was yet another bad bit of judgment on my behalf..

As it turns out, most of his costs were in marketing dollars spent trying to get a new customer and then hoping they didn’t leave too soon. His underlying costs to actually run the service was almost trival.

My friend says his business is doing fine noting that few companies are aware that Google will run your email for you under your domain name and fewer still understand how to go about setting it up. Google doesn’t advertise and no one calls you promoting this. But free versus $5,400 is a powerful force. Link to Google Standard free corporate email

Witness the announcement this week of IBM (article on IBM announcement) dropping the price of their own LotusLive service to a mere $3 a month stating that they’re hoping to stem customer defections to ‘free’ alternatives.

FREE is extremely powerful and virtually impossible to compete against and these paid for operators will slow slide into the abyss as email is a simple commodity.