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Office 365 vs Exchange Server for email: what’s the difference?

If you’re currently looking into your firm’s email strategy and considering whether to stay with Microsoft Exchange Server or move to Office 365 (or another cloud email solution), you’re probably not alone. 

Gartner statistics show that cloud email adoption is still in its early stages (at just 13% for publicly listed companies) but is starting to gain significant traction.

With other statistics showing that 90% have adopted the cloud for at least some of their business applications, it appears that for some businesses the decision on whether to let go of their legacy or hosted email system remains a challenge.

With Microsoft holding the market share for business email, we take a look at key differences between Microsoft Exchange Server and Office 365 – the hosted, or on-premises solution, versus the cloud version.

Data security

This is where the age-old debate of hosted versus cloud solutions security rears its head. With cloud solutions, security generally rests with the provider, and some businesses perceive the lack of control as too great a risk for them to take. In reality, however, keeping this level of control also means taking on the resource and time burden of configuring and updating security solutions and business continuity plans.

For many small businesses, relinquishing control and responsibility can be a positive thing – so long as their cloud provider can provide best-in-class security measures and has the ability to comply with any laws or regulations relevant to their line of work.

With an Office 365 email solution, for example, you receive automatic updates against newly discovered security threats, built-in protection against data loss, and adherence to security standards such as ISO27001 – offered as standard by Microsoft to all Office 365 customers. (If you work with a Microsoft partner, they may also be able to provide extra layers of security such as encryption and access controls for email attachments.)

With Exchange, the burden of performing security updates rests on the shoulders of your IT department. This can also require downtime which isn’t the case with Office 365 updates. The speed and instantaneous updates with Office 365 also means the latest features are in the hands of your employees right away.

Disaster recovery

Disaster recovery is a danger every business must prepare for. After all, money can fly out the window fast when your IT systems fail. So, how can you ensure that your assets are safe in the event of a disaster?

Office 365 is a key tool for effective disaster recovery. By backing up your valuable assets online, you can easily access all the information you need should your on-premise replications face a disaster. This is a key differentiator from Microsoft Exchange – if there’s a fire or theft at your offices, you’ll have to pick up the pieces yourself.


With Microsoft Exchange Server you, (or your IT support company), are in full control of the hardware and infrastructure, whereas with Office 365 you do not have direct access to this. The difference can impact on the level of control you have over configuration, upgrades and system changes. Again, small and medium businesses often perceive the control/resources burden trade-off here to be beneficial.

An experienced IT department will be able to troubleshoot issues immediately and, depending on their ability, be able to resolve issues right away. Office 365 leaves you in the hands of Microsoft. However, for all but the most veteran IT departments, Office 365 will prove the more resilient solution.

With Microsoft Exchange you are also in full control over data protection and sovereignty, which can be reassuring for regulated businesses such as law and private equity firms. However, with Office 365 now offering UK data centres and EU Model Clauses, this should be a moot point for many businesses.

Integration with existing systems

In general, it can be easier to integrate Microsoft Exchange Server with other applications if they are on the same network. However, most Microsoft partners will have the know-how to deliver the same level of integration with Office 365.  


If your business is growing or changing you may wish to maintain the scalability and flexibility that comes with Office 365, which allows you to increase or decrease the email storage you require from month to month. For a growing business with heavy email requirements, it’s possible to reach the capacity limits of an on-premises email server very easily.

The scalability of Office 365 makes the possibility of expanding your business and going global easier. For example, you can give a new office in Dubai immediately access to existing email accounts or add new employees to your business applications seamlessly and instantaneously. With onsite servers and exchange email, however, this could become a protracted affair with time and money needed first to set up servers. Cloud based email prevents this expenditure and makes global expansion more attainable.

Office 365 is a one-stop-shop

Office 365 is a natural, one-stop-shop for all your IT productivity needs, with its coherent and intuitive emailing and collaboration tools. 

For instance, Microsoft Teams enables collaboration between colleagues, whereas software stalwarts like Word and Excel provide essential features for employee work. What’s more, Microsoft consistently expand the lineup, and there may well be software solutions that your business can benefit from, and easily adopt, on top of the basic applications.

Migration to Office 365 can be an opportunity to both simplify and deepen your IT software. It comes with a variety of subscription models so you can choose the tools you want to add and leave the rest.


Although the transition to Office 365, as well as the employee training involved, does cost money, in the long run a migration to the cloud is more cost-effective. In fact, there are a series of straightforward cost savings that Office 365 can offer compared to Exchange and onsite servers.

First, physical equipment like servers and switches can be expensive and require floor space. There are also ongoing variable costs associated such as power consumption and support contracts to maintain the equipment. In addition, Hardware and Exchange licences generally need updating and reconfiguring every few years, whereas with Office 365 this is taken care of as part of the subscription. Whereas Exchange Server can be cost-effective for a larger enterprise with resources and infrastructure at their disposal, for SMEs it is often more budget and cashflow-friendly to choose the SaaS model of Office 365.

What’s more, most Office 365 subscriptions include access to SharePoint Online and OneDrive for Business – excellent tools for online document storage and collaboration – and the Office suite of applications (Word, Excel, PowerPoint and so on).

Whereas Microsoft Exchange Server can provide some additional control to businesses over their data and systems, for many business these benefits are not required – or can be undermined by the burden of responsibility for security and data protection. The reality is that for many small and medium businesses Office 365 now presents a more flexible, cost-effective and secure option for their needs.

If you are looking to move to Office 365, it is essential that you implement it in the right manner to maximise buy-in and return on investment. Editor’s note: This blog post was originally published in May 2017, but has since been upgraded with new and relevant information. Enjoy!

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