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Microsoft: Online shift is more than even Exchange

The software maker is looking to keep its lead in the e-mail space even as more companies opt for services over running their own servers.

The fact that many customers are shifting from running their own e-mail servers to getting mail as a hosted service doesn't have to spell doom for Microsoft, insists Rajesh Jha, the man who heads the Exchange business.

In an interview on Monday, Jha said that, although many see the rise of services as more of a benefit to companies like Google, he sees it as an opportunity for his business.

Microsoft's Rajesh Jha, shown here in his office earlier this year, says the shift from a world of servers to a world of services need not spell trouble for the Exchange business. Ina Fried/CNET

"I feel we will grow our share overall with the move to services," Jha said. In particular, Jha said that Microsoft has a better option for small and midsize businesses than it did when its only option was for those companies to run their own Exchange servers. "I think we have a huge opportunity for growth. I don't think we are in a defensive position at all."

In a year in which many software businesses--including a number within Microsoft--took a hit, the Exchange business continued to grow last year, Jha said, saying that revenue for the product nearly hit $2 billion and has 70 percent market share among corporate users.

Jha acknowledged, though, that competition for the in-box is definitely heating up.

"It is where people spend more of their hours," Jha said. "It's become a real critical part of the day. Our competitors are smart. They see it too."

In addition to Google, IBM continues to push its Lotus Domino/Notes combination while Cisco has said it will have a Linux-based e-mail offering based on last year's Postpath acquisition.

Sounding a familiar refrain, Jha said that he expects customers to warm to Microsoft's strategy, which lets them have the option of running Exchange themselves or purchasing it as a subscription hosted service.

"With Exchange, we don't give them any kind of technology ultimatum," Jha said. "We don't say 'Thou shalt move to the cloud.' "

Microsoft has shifted its priorities, though. Unlike past versions of Exchange, Microsoft developed Exchange 2010 as a service first, and only later has it done the work on the server product. That server product, which has been in testing for some time and reached the beta stage in April, is now ready in a near-final "release candidate" form.

Among its features is one that lets users "mute" an e-mail thread that they are no longer interested in being part of.

Jha reiterated that the final version of Exchange 2010 should be done later this year.

"I feel pretty good about how we are tracking," he said, noting that half of Microsoft's in-boxes--some 80,000--are now on the new version of Exchange. " We'll definitely be ready this year."