• by editor , David Baker , May 15, 2006

Let me paint you a picture. You have just seen a demo of a cool e-mail system, and now you dream of being able to manage campaigns, lists, bounces, replies, dynamic content and reporting in a brand-new way. You pitch the cool system to your internal technology team, and inevitably someone asks, "Why do we need to spend money on this system? Our internal system costs us nothing."

Sound familiar? Just recently I had a client who asked me, "Why don't we build our own?" I had flashbacks of 1999 when I was helping to launch an e-mail software company and recalled all the things we'd say to combat this question. Then I fast- forward to 2006, and this is what I come up with for an answer: e-mail is not free.

To help articulate the costs of e-mail in an organization, in 2002 Dr. David Yavin of DYS Analytics wrote the article, "Guess What? E-mail Isn't Free." His points are good to review because I think we all easily forget how much e-mail can cost for a company.

In the old days of communicating via snail mail, the costs included more than just the paper and stamps. The true costs also included the labor to type, copy and file mail, and then the labor to gather, sort and deliver it. This same level of consideration must also be applied to the total cost of e-mail. It isn't only about marketing e-mail, but also corporate e-mail and the costs of managing the assets necessary to deliver e-mail, protect the company from viruses and cyber attacks, and manage critical business functions.

Dr. Yavin laid out the following scenario: "Most employees would think twice about shipping a 100-pound package via overnight mail, mailing 7,000 hard copies of a newsletter each week or flying from Boston to New York via London to attend a seminar. Yet these same employees don't hesitate to send a 10 MB attachment to multiple colleagues for review, or... 7,000 copies of a 2 MB newsletter each week." These e-mail scenarios happen daily, and when totaled across an enterprise, have huge budget ramifications due to the cost of servers, bandwidth and storage.

According to the research firm Gartner, in 2002, the total cost of the ownership of one gigabyte of storage was $2,000. A global organization could easily consume 15 terabytes for messaging alone, to the tune of $20M to $30M per year. That figure excludes the rest of the system costs for desktops, servers, networking hardware and software.

So how does this apply to you as a marketer? If you don't understand the true costs of e-mail, you'll never get the budget or resources to manage the channel as you desire.

If you decide to build your own system, consider the costs and what you'll lose in terms of market responsiveness. These could far outweigh the budget impact of outsourcing the delivery and management of your marketing campaigns.

The question I used to get most often on this topic was "How many e-mails would I need to send per month to justify bringing e-mail in-house?" I'd usually counter the question with, "What are you really missing by having it outsourced or running through an ESP? And what does that cost you?" The answer could mean five million messages a month--or it could mean thirty million.

If you want to buy and install an in-house system, remember that organizations are already challenged for bandwidth. Marketing communications will play second fiddle to organizational communications. As we become more prolific in our business use of e-mail and IT groups become more of a gatekeeper, it will be more difficult to install a commercial e-mail system, manage servers, fight for bandwidth and gain IT budget to keep you updated and on top of the game.

With the emergence of triggered messaging, and the need to have messaging tied to business and Web events, many will reconsider installing their own e-mail system-- but do so with caution and take plenty of good advice, or it will cost you more in the long run. Unless you can be a purist in calculating the Total Cost of Ownership honestly and thoroughly, you might find yourself at the short end of the stick on bandwidth and support.