Networks in Action

The workstation software costs around $25 per PC (the Ferris report calculates costs for a 1,000 PC network electronic mail service at a single site); extra communications software brings this up to $60-100. Message servers must be added to the LAN; generally, each server can handle about 100 mailboxes, which can be standard low-cost PCs with a network adapter card and cable. That adds another $20 per mailbox. In addition, message transmission PCs must be added to the message servers; these need a modem and phone wiring in order to access outside users over a public electronic mail service, such as MCI Mail. That costs $25 per mailbox. Adding fax servers, a public mail gateway, and a gateway to the corporate WAN brings the total installation cost up to $174 per mailbox, a large jump from the $25 for the basic software.

The major costs, however, are the annual operating expenditures which amount to twice the installation cost-well over $300 per year. Local technical support requires one full-time equivalent personnel (FTE) for every 40 PCs in a typical simple LAN environment. About 10 percent of this network support staff's time goes to supporting electronic mail; that means one FTE per 400 mailboxes. Central technical support is needed to ensure LAN-WAN integration, maintenance, upgrading, synchronization and propagation of organization wide electronic mail directories, and other functions that can be complex in a distributed environment and immensely complex in a client/server one. Together, technical support adds an annual cost of $225 per mailbox.

Communications to remote locations via X.25, SNA links, fax, or dial-up adds $70 per mailbox per year, and product maintenance brings the annual operating cost up to $313 a year. Amortizing the installation costs over three years results in an annual cost per mailbox of $386. Technical support is almost 60 percent of this total, and product costs, including maintenance, make up just 25 percent.

The purchase and operating cost of a PC LAN varies widely, but Ferris estimates that an annual expenditure of $5,000 per workstation is common. The fraction of the cost to be allocated to electronic mail for purposes of planning should be around 10 percent, if that at is the fraction of network staff's time spent supporting e-mail. Add the resulting $500 to the $386 and $25 of e-mail software has generated close to $900 a year of expense. It may well be worth it, but the business case is very different depending on how many of the hidden costs are overlooked.

Questions for Discussion

1. Classify the distribution of the full costs of e-mail operation among the following telecommunications budget categories:
   1. the portion of the operating budget that does not include salaries and benefits of employees;
   2. the employee salary and benefit portion of the operating budget;
   3. the portion of the capital budget allocated to LANs and LAN interconnection;
   4. the portion of the capital budget allocated to WAN equipment; and
   5. the portion of the capital budget allocated to message-processing equipment.
      
      
2. Describe several methods for extending a company's e-mail system to remote sites outside the company, and assess the cost impact (both operating and capital costs) of such an extension.
   
   
3. Propose a method for identifying and measuring the benefits of an organizations e-mail system that can be compared against the full cost of such a system, to determine whether e-mail is truly worth the cost.