Top tips - cost-cutting

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We began compiling a list of practical cost-cutting tips, but quickly realised that any cost-saving measures should be considered prudently, with an objective, forward-thinking frame of mind… With that in mind, here’s our top tips for framing the right mindset for cost-cutting.

Next month we’ll publish our list of practical cost-cutting tips.

In the meantime, if you’d like to share your own practical cost-cutting tips please email us .

Think prudently… Sound judgement and an eye to the future are crucial to effective cost-cutting. Every action has a reaction, so carefully consider what impact cost-saving measures may have later on. Careful, prudent thinking means every penny is spent - or saved - cautiously and confidently.

Waste not want not… Waste is an evil you can do without. It’s often hard to find, and sometimes harder to stamp out. But ultimately: it serves no purpose and it costs you money. Even incredibly wealthy companies (like Google, for example) are obsessed with eliminating waste from their processes and operations. Why? Because it’s the number one most effective way to cut costs without cutting quality. By definition, waste adds nothing, so taking it away is a win-win. Being conscious of this fact when cost-cutting might help you distinguish between valuable and detrimental cost-saving measures.

Cost-cutting equals competitive advantage… Cost cutting might be a necessity now, but learn to do it effectively and it’ll become a competitive advantage in the future. Effective cost-cutting (such as the elimination of waste) lets you offer more competitive prices to customers and helps maximise profits and financial resources for future development. Short term spending curbs may be a necessity now, but think about how you can make sustainable savings that allow your business to become more competitive in the long-term.

Create a positive mindset… Permeating a positive mindset amongst your employees makes cost-cutting an opportunity and not a threat. You might need to cut costs to survive, but look at it another way: you need to cut costs to be more successful. It’s a subtle but valuable distinction. For example, employees might feel more motivated to cut costs if they believe such actions contribute to a company’s long-term competitive advantage and success, rather than just short-term survival.

The cost of not spending… Sometimes, not spending comes at a greater cost than you initially realise. Let’s say you adopt a do-it-yourself approach to marketing to avoid out-sourcing the task to an external agency. It may save money upfront, but at what cost? You run the danger of failing to attract new customers because you’re bad at marketing, thus losing more revenue in the process. In addition, you run the risk of taking your mind off your day job, which might further damage your business. By evaluating the ‘real’ cost of not spending, you can more effectively decide if cost-cutting measures are counter-intuitive. You may still find areas where you can cut costs, but sometimes, the best way to save money is to spend it.

The cost and benefit… Every pound offers a varying degree of benefit depending on how you spend it. £100 spent on a buffet lunch might seem like a waste, unless it bolsters staff morale and productivity during your monthly meeting. But then, that’s £1,200 spent on lunches over the whole year. That money could be spent on an annual away-day which helps foster a more productive team dynamic. Both offer similar benefits, so both are arguably valid costs. But which offers the most benefit? If you can measure the distinct benefits associated with distinct costs, you can begin to make more balanced, cost-effective spending comparisons, and thus more accurately decide where the precious pounds should and should not go.

Think opportunity cost… Every pound you spend denies you interest payments you would have received if you’d left that pound in the bank. Spending a pound on one thing also denies you the opportunity to spend it on something else, that might have delivered more benefits. An appreciation of opportunity cost may help you focus spending decisions in the right places, which will ultimately help you cut costs.

Know your priorities… Every pound you spend either contributes to your priorities or detracts focus away from them. Think back over your key objectives and justify spending and cost-cutting decisions within that context. If cost-cutting is needed, weigh up factors such as cost/benefits, opportunity cost and ‘the cost of not spending’ within the context of your organisational objectives. Doing this helps achieve focus and direction when cost-cutting measures are inevitable.

HR Focus - Changes to tax codes, handling performance discussions, employee redundancies

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Tax & Payroll: Changes to Personal Allowance and Basic Rate Limit in September

Changes to the basic personal allowance and basic rate limit will result in new tax codes for many employees in September 2008.

The basic personal allowance for tax year 2008-09 is increasing by £600, from £5,435 to £6,035. The basic rate limit is reducing from £36,000 to £34,800.

As a result, employers may need to make changes to their payroll, on the first payday on or after 7 September 2008.

Tax codes with an L suffix can be changed without notice from HMRC. For example, a 543L tax code becomes 603L. For other tax codes (without an L suffix), you should wait to receive a P6 notice from HMRC. Other codes should remain unchanged unless you receive a P6. Check the HMRC website for a detailed outline of old and new tax codes.

For more information and guidance, please visit the HMRC website

Handling performance discussions

Over the previous two issues of business i we’ve discussed the importance of performance appraisals and outlined the competency framework - a valuable approach for measuring performance and underpinning performance discussions. This month we offer three tips to help handle the performance appraisal conversation with your employees.

Daryll Scott, from personal development company My Noggin, comments that some organisations “gather valuable feedback, and prepare well-structured performance discussions, only to have it made ineffective by the human factor. Many people are caught up in the process and content of ‘what’ they are delivering and oblivious to how much their behaviour is influencing the other person.”.

This lack of focus on establishing a positive human dynamic during the performance appraisal conversation could undermine the hard work done leading up to that point.

Daryll offers his top three tips for effectively handling performance discussions:

1. Set it up… Take time to set up the discussion in a way that is agreeable and cooperative. Make it conversational, and take time to have a conversation about the conversation you are about to have. Check what the perceptions and assumptions are, and clear them up so that you start positively. By investing time at the start you will provide less opportunity for misunderstanding.

2. Is the boot on the right foot? The most destructive communication takes place when the individual refutes their feedback and then takes an argumentative stance. In many cases the line manager somehow makes it their problem to prove it, providing evidence to convince them of the validity of the feedback. Elicit their self-awareness rather than battering them with documented evidence. Consider the difference between: a) “Your numbers are down this quarter.” and b) “Have you had a chance to look at your numbers for this quarter?” The former is accusatory, the latter is conversational. For a performance discussion to really work, the recipient needs to be taking responsibility for the effectiveness of the conversation, not the line manager.

3. Shooting the messenger… The most effective way of getting out of the firing line so that the meeting can remain productive is to separate your intention for the meeting from the content of the meeting. Most people assume that others are aware of their positive intentions and this assumption is typically wrong. For example: If I say, “My intention is that you fully understand this feedback so that I can provide any support you need to make any changes you want.” Now if the feedback is grizzly, I’m not necessarily grizzly for delivering it. I’m on your side! If you want the individual to make a change, you are far more influential if you are coaching them, rather than pointing your finger at them.

Employee redundancies

A redundancy arises when there has or is going to be: a) a cessation of business, b) a cessation of business at an employee’s place of work (which could be due to relocation of business activities), or c) a cessation or reduction of work.

Redundancy is a traumatic experience for both employer and redundant employee. It can also adversely impact the morale and productivity of remaining workers, not just those directly affected. For these reasons, it’s vital to effectively manage redundancies with due diligence and sensitivity.

There are two key obligations when handling redundancies. First, you must undertake a fair redundancy dismissal procedure. Second, you must keep affected employees (and potentially their representatives) adequately informed during the process.

Fore more information, see our guide: Making an employee redundant

Negotiation

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Two ways to negotiate a bigger and better slice of the pie…

Understand your opponent

It’s long been said that understanding one’s opponent is key to effective negotiations. Getting to know your adversary helps identify what they want, but also what they are willing to give.

Recent research supports this assertion, but argues that successfully understanding your opponent means getting to know the head, and not the heart.

The research, led by psychologist Adam Galinsky of US-based Kellogg School of Management, draws its findings from three case studies examining the relationship between successful negotiations and a negotiator’s approach to understanding his opponent. In its findings, the study makes a clear distinction between two approaches: perspective taking and empathising. The former approach fosters more effective outcomes for both parties, while the latter tends to hinder mutually beneficial negotiations, the study argues.

The research defines perspective takers as “able to step outside the constraints of their own immediate, biased frames of reference”. Perspective taking focusses on unbiased, objective and rational judgements about an opponents interests, thoughts and likely behaviours. Showing empathy “leads individuals to violate norms of equity and equality and to provide preferential treatments”. Empathising permits greater sympathy and compassion, and creates an overbearing desire to make an opponent happy.

The study’s author, Adam Galinsky, concludes: “Negotiators give themselves an advantage by thinking about what is motivating the other party, by getting inside their head… Perspective-taking gives you insights into how to structure a deal that can benefit both parties. But unfortunately in negotiations, empathising makes you more concerned about making the other party happy, which can sometimes come at your own expense.”

The difference between both approaches is subtle, but crucial. In essence, it’s about distinguishing between what an opponent is thinking and feeling. Wandering too far towards an opponent’s emotional needs serves only to weaken your position in negotiations, resulting in a one-sided outcome. Perspective taking is more objective, and helps deliver more mutually beneficial outcomes.

Size up the pie

In a negotiation, each participant has a “bottom line”. This represents, for example, the most a party is willing to pay for something or the least they are willing to sell something for. The space between the bottom line of each opponent in negotiations is often referred to as the “bargaining zone” or “pie”. It represents the range of value available to negotiate over.

Knowing your opponent’s bottom line lets you size up the pie. Your negotiations can then focus on finding a optimum negotiating point which gives you a good or fair slice of that pie. The challenge: your opponent won’t reveal their bottom line, so sizing up the pie is a matter of judgement or guesswork.

Herein lies the danger, so says recent research by professor George Wu (University of Chicago School of Business) and Richard P. Larrick (Duke University). Wu and Larrick argue that costly mistakes can be made when sizing up the pie; mistakes which are hard to detect, and therefore hard to learn from.

Misjudging an opponent’s bottom line poses varying degrees of danger depending on how far off your guess is. Modestly ambitious expectations are likely to be naturally corrected during the negotiation process, but wildly ambitious demands may be aggressively opposed and could irreparably damage negotiations. As a consequence, Wu and Karrick argue, we tend to make less ambitious demands in the first place - reducing the size of the pie to begin with. To avoid being perceived as greedy or unreasonably demanding, we make modest assumptions about an opponent’s bottom line, and thus the size of the pie available.

This approach helps avoid the dangers of overestimating an opponent’s bottom line, but as a consequence you end up negotiating over a smaller pie. Your opponent may concede a larger slice of that smaller pie, but that slice may ultimately be less than you could have negotiated, had you judged the pie to be bigger.

Sizing up the pie is a complex challenge for negotiators, and it’s not an exact science. Experience and learning from previous mistakes counts for a lot. But ultimately it’s down to sound judgement, which cannot easily be taught. Of course, judgement can easily be strengthened with adequate, well-reasoned preparation. As discussed earlier: getting inside your opponent’s head (and not their heart) helps identify their key motivations and wants, which could allow you to better judge their bottom line, and thus the size of the pie available.

More info - Developing a negotiating strategy

Measure your Carbon Footprint… Today

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Research from the Carbon Trust, published this Spring, indicates that 46 per cent of FTSE companies have measured their carbon footprints, compared to 15 percent of large companies and 12 per cent of medium sized companies. Overall, only 1 per cent of the general business community knows their carbon footprint. The research concludes that whilst overall carbon awareness is increasing, there is “an enormous gap between the ways in which larger and smaller companies are responding to the issues”.

Measuring and reducing carbon emissions are gradually becoming strategic objectives for large and medium-sized business, motivated not just by environmental concerns, but by the significant cost-savings associated with minimising carbon usage. Meanwhile, the majority of smaller businesses are lagging behind.

The Carbon Trust explains that smaller businesses struggle with “a lack of time and expertise” to measure and reduce carbon emissions. In addition, they claim that many SMEs underestimate their “collective role” in cutting carbon emissions; according to their research, over a third of SMEs underestimate their contribution to carbon emissions by 50 per cent.

Unfortunately, these two dynamics don’t play nicely together. After all, it’s easier to dismiss the task as time consuming and difficult if you believe the net result of your efforts won’t make much of a difference.

It’s true that the process of reducing carbon emissions can demand time and expertise. But that doesn’t explain why so many businesses haven’t yet measured their carbon footprint. Working out a rough estimate of your carbon usage takes ten seconds using the Carbon Trust’s online indicator. And with a bit more information to hand - such as fuel, electricity and travel usage data - you can immediately build a more accurate picture of your carbon footprint using the Carbon Trust’s online calculator. These tools are a quick and easy, and crucially - they are designed to guide you towards making your next steps and finding the expertise you may need.

Only when you know your carbon footprint can you objectively determine how much time and expertise is needed to reduce it. So finding out is a good start.

It’s also important to remember that measuring and reducing your carbon footprint is not simply a philanthropic pastime. There are very real opportunities to save money by saving energy. These cost-savings could more than offset the initial cost and effort of reducing your carbon footprint. And again: you won’t know where those potential cost saving are until you make a start.

Now to the question: how is cutting the carbon emissions of one small business going to make a difference to a global issue?

July ‘08 figures from The Department for Business, Enterprise and Regulatory Reform indicate that small and medium-sized enterprises (SMEs) together accounted for 99.9 per cent of all enterprises. That equates to over four and a half million businesses.

And as we’ve already learnt, it’s this group that are the least responsive to measuring or reducing their carbon footprint. In addition, it’s this group that tends to underestimate the level of its contribution to carbon emissions. In other words, the large majority of UK businesses are doing little to act on carbon emissions, and many are producing more carbon emissions then they realise.

All of these businesses can take steps to reduce their carbon footprint. And the sum total of those individually small reductions does - collectively - add up to a significant difference.

At the moment, there’s a distinct lack of action amongst SMEs in the fight to reduce carbon emissions. Many see the process as important, but challenging. And many underestimate the extent of their “collective role” in reducing emissions. The good news: these many, the four million or so, can make start on the task… Today.

Start today by measuring your carbon footprint on the Carbon Trust Website

Interactive tool - Identify where you can save money by going green

More resources - Improving your environmental performance

Managing cashflow: the basics

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UK companies are facing ever-increasing liquidity pressures as both available credit and cashflow falls.

Figures from the Bank of England indicate that the amount of cash companies had in available, unused credit facilities dropped by over 13 per cent in the 12 months to June 2008. May alone saw the biggest drop in available credit since records began in the late ’80s. This comes alongside falling levels of cash and bank deposits; two factors which are combining to adversely impact the liquidity of UK firms.

This news may not come as a complete surprise, but it serves as a timely reminder of the importance of effective and regular cashflow management.

A dwindling availability of both credit and cash has obvious implications for business liquidity. Identifying such downward trends as early as possible is crucial to planning measures to prevent such issues threatening a business’s current operational ability and its future survival and profitability.

Effective cashflow management should be high on any business’s agenda, whatever the economic climate. But now more than ever, as economic conditions are putting additional pressures not just on cash income but availability of credit, businesses must pay extra attention to the task.

Read our guide - Cashflow management: the basics

Cloud computing

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Cloud computing is a familiar cliché. But what does it really mean? What are the benefits and costs? And is it time to jump into the cloud?

An insightful article by InfoWorld brings cloud computing into focus. They define it as “a way to increase capacity or add capabilities” to IT infrastructure, which “encompasses any subscription-based or pay-per-use service that, in real time over the Internet, extends IT’s existing capabilities”.

Think online data backups. Think web-based office, customer relationship management (CRM) and emarketing platforms. Think collaborative online workspaces. Think online image editing. Think remote access to computers a hundred times more powerful than yours. All such services are already in the cloud. And that’s just the beginning.

The key benefit… Cloud computing offers access to increased computing capability and capacity, through cost-effective and scalable online services. The key cost… Cloud computing services are remote and thus beyond our direct control. Its remoteness places the cloud far outside internal IT infrastructure; a fact that raises the important issues of service reliability and data security.

The loss of control over reliability and security vs. the cost-effective, continuous expansion of capacity and capability represents, in simple terms, the cost-benefit equation of cloud computing.

So, let’s further illustrate the benefits…

The cloud provides on-demand access to advanced, powerful computing and software platforms. It creates an online workspace, from which you can communicate, collaborate or work remotely. It offers solutions to a multitude of needs, from mail hosting and security to image processing and storage. The list goes on. And this myriad of cloud services holds the potential to reduce software licensing spend, cut hardware and maintenance costs, and make working lives easier.

Consider the ’software-as-a-service’ platform Salesforce as a case in point. In short, it’s an online CRM platform which offers sales management, marketing automation and customer service and support services. And it offers these services to individuals and global businesses alike. Or… not quite alike… Salesforce is scalable to fit different users’ budgets and needs. That means a small business can enjoy the benefits of the same CRM platform used by global companies, but not pay for features it doesn’t need. As that business grows, the platform can grow too, expanding to provide increased features and capacity. For example, if said business employs its first in-the-field salesperson, they can instantly and cheaply begin using the ‘mobile’ version of Salesforce, accessible via smart phones and internet-enabled devices. Some features also pop along for free, such as the recently announced Google Apps integration, which seamlessly links itself and Salesforce into one single web-interface.

The Salesforce and Google Apps combination is reminiscent of another, competing collection of business productivity services, called Zoho. Zoho offers a whole bunch of services - from CRM, project management and invoicing systems, to a word processor, note taker, organiser, collaborative chat and mail services. Again, these services (some of which are free for up to three users) provide capabilities and capacities that can grow alongside users’ needs.

A third, final and wildly different illustration of the scope and potential of cloud computing is Amazon’s EC2 computing platform, which provides “resizable compute capacity in the cloud”. EC2 lets you create your own virtual computing environment right inside Amazon’s cloud. From there, you can run applications that draw on the raw computing power of EC2’s infrastructure. For example, the New York Times used EC2 to convert scanned images of 11 million newspaper articles into PDF files. They did so in 24 hours; a fraction of the time it would have taken on in-house computers. Again, it’s about increasing capacity and capability.

Now to the thorny issues of reliability and security…

First of all: it’s impossible, and unfair, to make generalisations about the reliability and security of the entire cloud computing industry. A cloud service could theoretically be just as reliable and secure as a similar service running onsite and behind a firewall. Individual cloud services must be evaluated case-by-case, within the context of your distinct IT needs.

In an article entitled “The dangers of cloud computing“, Computer World explores the assertion that decisions about whether to use cloud services to perform IT tasks should focus on whether those tasks are “mission-critical” or “non-mission-critical”. If a task is mission-critical, and a cloud service cannot provide the required level of reliability and security, it should not be used.

As grand as the New York Times’ plan of converting its old articles was - it was not mission-critical. In fact, it was much less mission-critical than the computing tasks millions of users conduct every day in the cloud, such as managing sales leads, following up support requests, communicating with customers and issuing invoices.

These users either don’t know the risks, or they have made professional judgements - to first define if a task is mission-critical or otherwise, and then to decide if cloud computing services are, within that context, reliable and secure enough to complete that task.

Is it time to jump in?

Cloud computing is in its infancy, so it’s wise to be wary about jumping in with two feet. With that said - feature-rich, reliable and secure services are emerging that challenge doubts and increase confidence in the cloud.

The challenge for the cloud computing industry is not so much to offset risks with additional benefits, but to strike a balance between features, reliability and security. If the industry does that, the cloud will succeed.

The challenge for you is much more simple… See through the hype. Look past the benefits, and evaluate the risks too. Then, if you still see value in the cloud, maybe it’s time to take the jump.

Cloud applications and services

We’ve compiled a list of cloud computing applications and services:

Cloud applications and services

Backing up data

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Data… A few megabytes of spreadsheets or a terabyte of design assets. If your system crashes, you’ll be lost without it… So back it up.

To piece together a backup strategy, you need to understand the common approaches to backing up, and the strengths and weaknesses of available backup mediums.

Backup approaches

Full backups

A full backup creates a complete copy of an entire system, or a complete copy of selected files and folders. The result: an exact clone of selected data.

During every new full backup the entire data set is copied again, regardless of what data has been added or changed since the previous backup.

A new full backup either overwrites the previous one, or is copied to a distinct location, such as a dated folder. The advantage of the latter approach is that you can roll-back to previous backups if newer ones are corrupted or no longer contain recently deleted files.

Full backups are sometimes preferred because of their cleanliness and simplicity. They are a precise clone of a data set which - unlike other backup methods - don’t rely on specialist software to function. You can take away a full backup, open it on another computer, and access the data instantly.

Restoring data from a full backup is relatively simple. Because it’s an exact copy, you can easily navigate to desired files and folders, restoring individual files on demand. Or, you can simply copy and paste the entire data set back to its original location. Of course, data added or changed since the last full backup will be lost after a restore.

The problem with full backups is they take time. 60GB of data could take an hour or longer to backup, and the process could disturb business operations or force you to schedule backups out-of-hours. Such pressures might prevent you from doing them as frequently as you should, exposing you to the risk of significant data loss.

Incremental backups

Incremental backups begin with a full backup. Once that’s done, only amended or newly created data is subsequently backed up. The result: a full backup plus a collection of new data sets containing new/amended data.

The process requires specialist software, which identifies changed or added data and manages the backup and restore processes automatically. Some incremental backups keep archives of previous versions of amended/changed files so that data can be rolled back to a previous state. The backed up data may not be accessible manually, or accessed on another computer without installing the backup software.

The advantage of incremental backups is they are usually much quicker than full backups. The exact duration of an incremental backup depends on the amount of data added or changed, but typically they will take a fraction of the time needed to conduct a full backup. Some modern backup programmes are also more capable of conducting on-the-fly backups, which means you might not need to halt data activity during backups.

Because incremental backups (and subsequent restores) are dependent on specialist software to function, it’s vital to select reliable and robust backup software. The process of working out what data to restore is a complex task, which in rare cases could fail. Modern software is becoming much better at the task, but it’s important to test programmes thoroughly and have confidence in their reliability.

Note: If you’re unsure about which backup approach to adopt, remember: you can use both independently. To illustrate, you could manage a weekly cycle of full backups on one external hard drive, and implement an incremental backup process on another. If the latter process fails you could revert to the previous full backup… The most important thing is to consider the strengths and weaknesses of each method. If the weaknesses of either approach amount to an unacceptable level of risk, consider how a combination of different approaches could be used. (That said, it’s also easy to overcomplicate things - your backup strategy needs to be robust, but also simple enough that you’ll keep it up.)

Backup Mediums

Tape. Suited for large-scale, ’set-and-forget’ automated backups. Tapes are relatively inexpensive but tape drives are costly and relatively slow. Tapes are durable and compact, so they can be easily moved, stored and archived on or off site.

CD/DVD. Cheap, compact and portable. No moving parts, so when in good condition they are relatively stable. Disk capacities are a fraction of modern hard-drives so full backups may require numerous disks, and the process must be managed manually or with backup software. Because disks may need to be changed they are not ideal for unattended/automated backups.

External hard drive. Modern USB and Firewire drives are fast, reliable, and offer storage in excess of internal drives, making full and incremental backups easy to manage. Their portability means they can be easily transported off-site, but like any hard drive they are sensitive to shock, heat and moisture. Some external hard drives support “RAID” configurations for simultaneous mirror backups over multiple hard drives. Some drives can also be networked. All hard drives contain sensitive moving parts, so external drives are as (if not more) susceptible to failure as internal ones.

Server. Servers can be used as a backup location for data stored on individual computers, or they could be employed as a ’shared drive’ upon which users store their data in the first place, which is then backed up onto another backup medium. They are expensive, but often support advanced features such as “RAID” which allows automatic ‘mirroring’ of data onto another server hard drive, stored on or offsite.

Online ‘cloud’ storage. Online storage can be used as a networked hard drive; meaning you can drag or drop files like an internal/external drive, or use your own automatic backup software. Or, they are designed as proprietary backup services in themselves; usually incremental backups which can be done automatically whenever you are online, at a pre-determined time, or whenever your computer is idle. Capacity is usually modest (at a fraction of a typical internal hard drive) but most services offer increased capacities at a cost. A fast, reliable internet connection is crucial if regularly transferring large amounts of data. As with off line incremental backup services, the reliability of the backup process is paramount to the ability to successfully restore. On top of that, online services must be chosen carefully, considering factors such as: guaranteed ‘uptime’ of service, safety and security of where your data is stored, how quickly restores can be accessed and downloaded.

Piecing together a strategy

Rule number one: the more backups in the chain, the lower the chances of losing everything… Rule number two: using different backup approaches and backup mediums helps minimise the weaknesses of one single approach.

Paranoia can be a good third rule when it comes to backups. And it’s easy to become paranoid when you contemplate losing everything. But worrying too much could lead to obsessive backup processes that are overly costly and time-consuming. It’s therefore important to find a balanced backup strategy that reflects the value of your data (or put another way: the cost of losing your data), but one which is also pragmatic about what you can afford to do, and what you can (realistically) be bothered to do.

When defining a backup strategy remember the following… If your data is invaluable, be bothered… The more backups the better, within reason… If you’re not 100% positive on one approach, consider others ways to crack the egg… All backup mediums - regardless of cost - are prone to failure, so consider the strengths and weaknesses of each and use a combination to reduce overall risk… Always have an off-site backup in case of fire or theft… And finally: settle on a backup strategy that protects your data as far as you reasonably can, but one which is realistic enough for you to keep up.

More info

Check out online data backup and storage services in our list of cloud applications and services.

Hosted email

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There are many hosted email solutions, from those offered by web-hosts to services nurtured by dedicated email providers. They give you email using your website’s own domain name, message storage, a web email interface, and important stuff like email access via your favourite Mac or PC email software. Some are good, others are OK. Few really stand out.

Or at least, that’s what Microsoft, Yahoo! and Google would like you to think. The big three global tech companies are offering hosted email solutions for professionals and small businesses. These services build on technologies developed for their free consumer email services, with a bit more on top.

So, let’s explore the big three’s hosted email services to see what you get…

Microsoft Office Live Small Business / Microsoft Online Services
Office Live Small Business - first year free
Microsoft Online Services - price TBC

In early 2009 Microsoft will launch an integrated collection of business services in the UK called Microsoft Online Services. Until then, you can get 100 email accounts hosted through Microsoft Office Live Small Business Email, free for the first year.

In addition to custom-domain email hosting, Microsoft Office Live Small Business offers website hosting and other online business productivity services such as email marketing and project/document management tools. The service provides basic email functionality, such as cross-platform web email, and supports email, contact and calendar management through Microsoft Outlook.

But the fun really starts next year, with the arrival of Exchange Online, a big part of the upcoming Microsoft Online Services. It’s a fully hosted communications solution based on Microsoft’s world-leading Exchange system, providing email with 99.9% scheduled uptime and technical support. As you’d expect from Exchange, there’s also advanced business features such as built-in continuity and disaster recovery, mobile email and push, and various advanced sync features.

It’s hard to say if and how Office Live Small Business will transform into Microsoft Online Services. For now, the former is a competitive offering at its price (free). In 2009, Microsoft’s hosted email service should get really interesting. One to watch.

Yahoo! Business Email
Around £20 per year for 1 account, £5 per month for 10

Yahoo doesn’t offer hosted email for free, but its paid for options are competitively priced and decently-featured.

Email protection and security is in focus with Yahoo! Mail. Built-in Norton Antivirus protection is standard, and Yahoo! has developed its own technologies - SpamGuard and DomainKeys - to help fight spam. The email front-end has seen extensive re-development in recent years, offering similar functionality to desktop email clients. Yahoo! is also strong on support, with 24-hour access via email and phone.

One big drawback of Yahoo!’s email service is a lack of IMAP email support (supporting only POP). You can download emails using an email client on the PC or Mac, but IMAP is often preferred as a way of keeping messages in sync between client software and server.

Google Mail
Standard edition: free for up to 200 user accounts. Premier edition: £25 per account.

Google’s standard edition offers custom-domain hosted email for free. After a few tweaks to your domain settings you and up to 199 other users can access email via web/mobile interfaces, or via your chosen email client on Mac or PC.

Google puts great effort into policing its email network for spammers and in technologies for filtering spam. As a result the built-in spam filtering is on a par with - if not better than - many paid-for solutions.

Web-integration with other online ‘cloud’ services such as contacts, calendars, Google Documents and Spreadsheets makes the ‘Google Apps’ package a comprehensive offering. And recently, Google began integrating third-party online services too, such as integration with the customer relationship management software Salesforce.

The downside: Like any free service, guaranteed uptime and dedicated technical support are lacking. That’s where the premium edition kicks in.

For £25 per user account, the premier edition makes up for the standard’s shortcomings. It offers a service level agreement with a 99.9% uptime guarantee (though this appears to be only for the email web-interface), online support, and phone support for critical issues.

The premier edition also offers advanced email services from Postini, a specialist email firm Google recently acquired. The ‘policy management’ service offers administrative control over filtering and blocking messages, and configurable spam and virus filters. ‘Message recovery’ lets administrators recover messages deleted in the past 90 days (extendable to 1-10 years for an extra cost).

The verdict

The big three’s email services are feature rich, to be sure. But email is about more than just features. The integrity, reliability and security of such services is crucial to ensure maximum email uptime, reliable and timely receipt and delivery of emails, protection against viruses and malware, and effective email backup and archiving. And with all that, comes the need for support when things go wrong.

Premium, paid-for services are bridging the gap more and more, providing reliable infrastructures, service level agreements, and dedicated support. Google’s acquisition of email security, administration and archive company Postini, and Microsoft’s moves towards Exchange Online, are particularly interesting developments to watch with respect to future advances in reliability and integrity.

An IT manager might wait a while before ditching the internal mail server to outsource email to hosted providers. But for individuals and small businesses, these services are worth a look. In time they’ll improve, and thanks to the increased market competition, other hosted email services should improve too.