Precise’s Zohar Gilad explains how his company shaved more than $2 million from its annual IT budget by migrating its IT infrastructure and applications to the cloud.

sun beam clouds

I’m not the first to jump on the latest technology. Even after working in high-tech for more than 20 years, I am still a late adopter. But if you can prove to me that a new technology will save me or my company money, I’ll make the switch in an instant.

In 2008 the company I work for, Precise (a developer of application performance management systems), was spun out of its parent company Symantec and into a private company. Suddenly, we had 1,000 customers to support, and a limited IT department. Symantec offered to sell us licenses for SAP and other enterprise software packages that we had been using. But in our new structure, we needed applications that were scaled down and easier to support. We ditched the world of licensed software and annual commitments to large capital expenses on equipment — the traditional way of doing IT — in favor of cloud, SaaS and virtualization.

As a midsize company with more than 200 employees, it was a tectonic shift. But after a year-long migration of our IT infrastructure and applications to the cloud, we shaved more than $2 million, or 70 percent, from our annual IT budget. Here’s how we did it.

Our first priority was to find a solution to support our customers, so we chose Salesforce and NetSuite for the front and back-office solutions. It took a single data analyst a mere five hours to migrate all of our data from SAP to the new systems. For customer support, we chose Drupal and for marketing we chose Marketo — both of which were seamlessly integrated using WebSphere Cast Iron Cloud Integration.

Next up, we had to deal with the Microsoft Exchange servers that we’d inherited from Symantec. Microsoft Exchange can be a bear to support with a slim staff, so we opted for Google Mail instead. The e-mail migration took about five days, and later we also moved from Microsoft SharePoint to Google Sites for collaboration. The cool thing is, employees don’t have to do everything on Google. They can still access their favorite Microsoft Office applications, such as Excel, or use Outlook front-end if they wish.

We also went through a major server virtualization project in engineering — chopping off about 60 percent of our server expenses — and switched to AT&T fiber for networking and adopted VoIP for telephony.

None of the technologies that I’ve mentioned are new or even groundbreaking. But the fact that we could adopt all of them in a short period of time, integrate them using a single data analyst and realize such financial benefits is astounding. Even five years ago, small and midsize companies couldn’t afford state-of-the-art technologies to run their businesses. That’s all changed — and the playing field for IT sophistication has leveled out.

Not only is using newer, Web technologies more affordable, but they’re also more reliable. That’s been the case at Precise, at least. We haven’t had any issues from moving to a SaaS environment. We didn’t spend a bunch of money on hordes of consultants to get everything in place. It really was that simple. I give credit to our former IT director, Sharon Cohen, for choosing the right strategy and the right partners — that’s key.

Our transition to the cloud means that today we spend less time managing all the plumbing and more time working on our own products. We’re even looking at deploying cloud-based systems for R & D. And let’s not forget, we are saving more than $2 million per year. That’s the kind of money companies of our size, which comprise the bulk of the U.S. economy, can really put to good use. We can use those savings to hire strategic new employees or bring new features and services to our customers. For midsize companies, there’s no doubt:  rip out your on-premise software apps, go SaaS and adopt the cloud across the board.

Zohar Gilad is the executive vice president at Precise, a developer of application performance management systems. Before joining Precise, Zohar held senior executive positions at Mercury Interactive, which was acquired by HP in 2006.  

Image courtesy of Flickr user AndyFitz.

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  1. This is like listening to a conversation at a bar.
    Where’s the objective evaluation of functionality? Comparison of products across the market.

    If a company is using SharePoint isn’t it easier to migrate to Office365 – which is SharePoint in the cloud? And Exchange in the cloud? Google’s offerings are hardly functionally equivalent.

    1. office 365 is also functionally different to current Office experience

      1. You are incorrect, Cloud Assist. Office 365 functionality has 905 of the functionality of office on prem, and as far as using exhcnage online, it is nearly 99% equivilant, at a fraction of the cost of on-prem without the need for exchange admins.

    2. George Kwabenah Appiah Joe Wood Wednesday, February 22, 2012

      Office365 maybe the natural cloud path to someone using SharePoint, but ask yourself what percentage of SharePoint’s and Office’s floated features do you REALLY use? The writer may simply have found Google Sites’s limited features be enough for their use case.

    3. Brett (computer repair expert) Joe Wood Saturday, February 25, 2012

      Agreed. There are serious limitations with gmail over an Exchange system. This is not to say you can’t use gmail in the interests of objectivity they should have atleast been mentioned. You might like to check our article Exchange v Gmail at http://www.newtonsnerds.com .

  2. I noticed that not much information was given about the server virtualization, and I’d be interested in hearing more about that. Thanks

  3. Wait – so in this case, the cloud is cheaper than self hosting?

  4. Hello Zohar, this is an interesting read that I am sure I will share with some of my prospects! Thank you taking time to share.

  5. “It took a single data analyst a mere five hours to migrate all of our data from SAP to the new systems.”

    That might be true for DATA TRANSFER ONLY but don’t give me that about converting a whole CRM system from one to another. 5 days? Get real. Most companies take the opportunity when switching to new platforms to change things significantly.

    As for the rest of the stuff – this is not practical everywhere. You act as if the switch to Gmail is nothing because “people can still use Outlook.”

    Hate to break this to you, but making the change from one system to another is the easy part in any IT environment —- making sure all the users understand what the heck is going on and how to adapt is a whole other story.

    1. Anonymous Coward Scott Friday, February 24, 2012

      So essentially you’re saying that a shift from self-hosted to cloud is requiring a shift in corporate culture, right? I thought this is obvious!

      You may have also overlooked the fact that they spent a year not just doing the migration but also using the new systems. They should’ve observed potential problems by now, I think.

  6. @zohargilad love your post! thanks for sharing the message – all SMB owners and enterprise IT managers can benefit by moving IT to the cloud, we’ve realized similar savings using @salesforce @netsuite and our own cloud phone systems @ringcentral – curious if you’ve moved your business phones to the cloud as well? more cost savings to be realized from that by ridding your offices of on-premise phone tech such as PBXs which are archaic and obsolete.

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  9. We’ve used SugarCRM (1/3 of the cost of SalesForce) with Google Mail and collaboration tools. A similar story — but even lower cost. But it’s not just cost it’s also complexity that gets reduced. Google tools are not only easier to deploy – they are easier to use.

  10. :) As someone who sells Microsoft’s software as a service (pay per use per month), I couldn’ resist informing the world: One could do a similar exercise without building a patch work of apps based on multiple platforms. SharePoint, Lync/Skype, Exchange, CRM and a range of open source as well as commercial apps built by ISV’s that seamlessly integrate with Office ARE AVAILABLE today via an ecosystem of hosters worldwide.

  11. I’m really pro-SaaS and Cloud. One thing that I can’t help thinking though when reading this is, how have you implemented control of your data into the SaaS eco system? Do you trust the SaaS vendors completely with your data or do you take measures to keep some level of control of your data? Both in terms of vendor change, vendor bankrupcy, disaster recovery, BI/data mining across your different data sources. Would be interesting to hear your thoughts on this.

  12. Can’t agree more than new cloud technologies are a bane to companies with small IT outfit. Wanted to understand how you manage security and confidentiality of data stored on cloud. I’m working for government agency in Singapore and data security always a concern. Thanks.

    1. Trevor— take a look at independenceIT.com for a secure complete integrated CloudIT Workspace(TM) solution that is SSAE16 compliant. Hate slaes pitches in this type of format so reach out to me if you want more information…

  13. Cloud has brought immense possibilities and this is just the beginning. Thanks for sharing.

  14. Wow… this sounds as a good marketing article.

    …and how ironic is it that there are 4 ad banners for MS Office 365 around the article text!

    1. Shouldn’t be a surprise. If you look at his LinkedIn profile, Zohar has not disclosed the fact that he is a Partner for Cloud Power, LLC.

  15. Hi Zohar, we are looking at a similar project in my company. Can you tell me how strong your SLAs are at managing uptime? The risk of everything being Internet based is a concern of mine.

  16. Michael Hoffman, Inc Sunday, February 19, 2012

    “For midsize companies, there’s no doubt: rip out your on-premise software apps, go SaaS and adopt the cloud across the board.” Hopefully people put this blog in perspective when they read it. Sounds like a nice success story, but there are an equal number of negative stories. Cloud is not a one-size fit all solution. Careful consideration has to be taken into the decision. While SalesForce does provide a strong service offering, custom development can be very expensive as talent is scarce and comes at a high rate per hour. While the larger enterprise software can cost you more short-term, you may realize long-term savings with it over the cloud. It requires a vetting process like anything. There are many other risks and considerations that go into this decisions. One is PCI compliance with cloud services. Not all cloud services are PCI compliant and this can be a deal-breaker for your decision. Other risks include disaster recovery (ask American Eagle Outfitters about their 8-day outage), service quality, integration, etc.

  17. I’m having a hard time with that “single analyst/5 days” to move from SAP to SFDC. Either (1) your parent spent a LOT of effort on keeping the SAP data clean or (2) you simply did a garbage-to-garbage move. From experience, I’ll vote for #2.

  18. I agree with some of this. It is good for non critical and small business solutions and could save some money.
    I could not recommend to my clients to place their business critical solutions in the cloud as the risk is too great.
    1. Have no control over the operation or security of my network.
    2. If in dispute, the Service provider holds all the aces and can literally switch off my business.
    3. The people who runs these solutions are not beholding to, or responsible to my business which is a concern.

    As I said in the beginning Cloud based services are great for non critical services or maybe very small companies but for me, my business critical processes and data need to be on our own network supported by our own staff, and if I then have spare space I might as well host my own non critical too.

  19. They didn’t mention going to Virtual Desktops and a flexible delivery to portals like Thin Clients and Tablets. They could save more than 50% again when they are fully virtual. Why stop at the servers? If you already love the idea of virtual servers then ditch the expense of operating and maintaining PCs too. There aren’t many that can do full Infrastructure as a Service and Platform as a Service, but we do it everyday. When you can push a full virtual desktop to any device, and have all of you Windows applications anywhere, (without citrix) that’s when you’ll start to see some great savings.

  20. This cloud solution must be called Zohar Gilad cloud solution. It is the human ability that counts, not the tools. Now, if he leaves the company, it will be havoc. Upgrading in sync the software mish-mash is beyond a typical employee skills.

    1. Anonymous Coward miha Friday, February 24, 2012

      See, that’s where you show that you don’t understand cloud. There’s nothing more to update. You receive most services via the browser, the update happens when the service providers updates his servers.

      There is a risk of things breaking. Then you have indeed to call in an expensive consultant and let him do the fix. But this does not happen often, and the work required to fix things is usually cheap, compared to just the rollout of one single rich client (like Outlook) to all workstations of a small company (say 1000 employees distributed in 10 offices) – such an upgrade might be cheap for large companies with a big IT infrastructure, but at that size, maintaining 10-15 people in IT isn’t worth it, so upgrades are painful.

  21. Hi Zohar, thanks for your sharing your experience and ideas. You mentioned “We’re even looking at deploying cloud-based systems for R & D.” Can you expand on which aspects of R&D?

    I am in R&D and we are not sure we can trust the “cloud” to be secured enough to store our very confidential intellectual properties.

  22. Raul Velazquez Sunday, February 19, 2012

    Hi Zohar…You have definitely made lemonade from lemons. It sounds to me like there were two key factors in your success: 1) you had the technical expertise in-house to make this happen-many organizations don’t and a project like this becomes a nightmare, and 2) your applications had high levels of integration-little or no interface development work is for sure the way to go in a compressed time-frame. Now you know what it takes…in case it happens again.

  23. For small companies there is no doubt this can be done. Medium to large size companies that are Global and complex beyond your wildest dreams is not this simple at all.

    1. Which is why he noted ‘for mid-sized companies’. A lot of companies are under a couple thousand employees. Numerically, most are under 500.

      Michael Hoffman – you’re right that any such migration needs assessment but it should go both ways. People seem to assume that their current business processes are sacrosanct and any new software needs to be altered to conform. But many times such processes have emerged over time rather than being designed or were designed in reaction to an earlier tool’s capabilities. C level execs really need to ask whether it’s better for the business to adapt their current processes to a tool like Salesforce rather than just assuming that they happen to have stumbled onto the best possible process. If a business does need to do some development around a tool like SF, well, you can spend a lot of development dollars and not spend $2m.

  24. So thanks – now I can spend 40 hours in the next two weeks discussing why we can’t cut 70% of our IT budget. First of all, as a “technical” company it is much easier to pull this off – heck most of you probably wanted Google Apps – for a non-tech based business users do not adapt well so for every $1 you save, you spend $2 in training and lost productivity and increase support requests. Go back to developing please.

  25. These type of posts are ver confusing and lack some detail to be objective. Where were the most of the costs realized? where they running a bloated IT Dept? how many IT professionals they let go to realize such high costs? We are a company that is highly virtualized and use most of the MS products mentioned in the post with the exception of CRM or SAP, and I have not been able to find a cloud solution or SaaS ( unless I was going to have to purchase upgrades of all the software) that would save us any meaningful amount of money. I would appreciate more context and information in these type of posts.

  26. AFter paying for SAAS for five/ten/fifteen years, will that cost still be cheaper than owning the software and hardware in-house ? Need to incorporate the time value of money as well into this calculation

  27. Roberto Olivares Sunday, February 19, 2012

    Reading the posts of many people here, I have to say I hope I never have to work with most of you commenting on this article.
    You’re the kind of workers who want 101 meetings to see if it’ll work, or you’re the kind that starts any conversation with why it can’t work.
    Bottom line is Zohar has a real work experience that worked, what do naysayers here have? I didn’t read any specific anecdotes on how it failed for you!

    1. You are right, let’s line up and drink the kool-aid!

    2. Also, I did provide a specific business case where service providers failed. Read up on American Eagle Outfitters: http://www.computerworld.com/s/article/9182159/American_Eagle_Outfitters_learns_a_painful_service_provider_lesson. I am in no way anti-cloud, but I am sick of listening to people for 10 years make statements like “there’s no doubt” and “all SMB owners and enterprise IT managers can benefit by moving IT to the cloud”.

    3. So he says. The piece is full of vague generalities. He will experience latency and outages relying on the “cloud”.

  28. Reblogged this on SaintsFeet and commented:
    Interesting first-hand experience going to the cloud.

  29. It is interesting to see the legacy IT service provider comments. I am a Google Apps Reseller and everyday I see small businesses unshackling themselves from the mystical ‘server’ in the sacred ‘server room’. Zohar’s article may not be detailed analysis but it is typical of SME in North America who are moving to the cloud.

    1. Michael Hoffman, Inc Weehooey Monday, February 20, 2012

      My issue is not the detailed analysis. My issue is his comment to rip it all out and go cloud across the board. I am onboard with cloud when it makes sense. VMWare has been a life saver for me on several occasions.

  30. No mention of desktop virtualization? The savings could be even greater by using a virtual desktop solution like @v3systems…

  31. Carol-Anne Welsh Monday, February 20, 2012

    Without an actual breakdown of cost savings, the article pays lip service to what we are all having drummed into us, that IT costs are cut by adopting the cloud. I have looked into going to the cloud for my firm, I have yet to receive a competitive quote. Also, in my line of business our client’s data must be secure and hosted within the EU – google cannot provide these assurances.

  32. I have to comment on what precipitated the need to switch. It had nothing to do with cloud vs traditional licensing. It was a decision a freshman business major could make. Let’s see build a huge complicated IT infrastructure or consolidate into a service oriented architecture and pay as you go. It’s strictly a numbers game when your business is forced to operate as a new start up. My experience comes from the service bureau environment, providing back end billing services for cable, Direct Broadcast Satellite, credit card and telephony businesses where our customers came and went based on the “newest” provider in the space. Could be an in house solution or another service bureau product. It simply comes down to dollars and timing.

  33. Isn’t SFDC and NetSuite both CRM systems? I didn’t realize Drupal (content management platform) also offered customer service apps? Or, is it used as a community site. Why wouldn’t you use SFDC module to track and manage customer service as well?

  34. I am glad the data went so easy over to your new CRM in “just five hours”. However, how many hours of training, and work slowdowns were caused by this quick changeover? I have my business on Salesforce, not knocking the service. However, let’s be honest here any change like that in a company of decent size takes considerable training time. The same goes for your migration of Exchange to Google Apps. While us computer types prefer this, those that are used to Outlook and scheduling their meetings etc like that for years are going to have quite a learning curve. Why not use a hosted exchange service like Intermedia or even Office 365?

    I also am hesitant to use cloud services for data storage, and I relay that to my clients as well. First of all speed of access is a concern, but secondly the way laws are changing everyday I would not trust my corporate data to a cloud provider. My choice is to backup in house file servers to the cloud instead as a backup solution only. Basically the new tape storage.

  35. Also missing: Up front costs. You might be saving $2M/year (though realizing 70% savings by moving to the cloud seems dubious), but what did it cost you to get there?

  36. Good job on the technical article. I came to read about cost savings, but all I got was a list of technology implemented. Where is the cost savings? Like the guy above said, time value of money. What is the cost savings in 5 years. In which areas did you save costs? Was it cost savings or cost deferrals? Please rewrite/repost…. Maybe get your accountant to help you come up with the numbers.

  37. Good job on the technical article. I came to read about 70% cost savings, but all I got was a list of technology implemented. Where is the cost savings? Like the guy above said, time value of money. What is the cost savings in 5 years. In which areas did you save costs? Was it cost savings or cost deferral? And what SAP systems was it and how did it only take 5 days to migrate when other companies spend months migrating data? How did you deal with change management/project management? ERP/SCM etc… I know most people just write in a rush but a comprehensive, coherent, contextual, and concise article would really help the readers better understand your story.

  38. Saving $2mil per year which is 70% of the previous IT budget. That is $2.7mil for around 200 staff $14285/staff/year. I have 120 staff and have spent around $50K on IT and Telephony this year. We are EMC\VMware\MS partners running an Office365 trial but I reckon I could save $2mil doesn’t matter what I did

  39. Siddhartha SenGupta Monday, February 20, 2012

    Agree with Joe Wood. Zohar Gilad, where is your e.g. 5-yr cash flow projection? If you transfer CapEx to OpEx, first year you would certainly be making merry. In any case, what is the % of IT expenses to total expenses in your company? If in the range of 5%-10%, you are saving 3.5%-7% Qr1 Yr1. Will be delighted to hear of figs for Qr2 onwards for assets, liabilities & OpEx off your balance sheets. Does IT find a mention in your Qly & Annual figs?

  40. Very nice ideas, but we need more informations on Server Virtualisation and Green IT

  41. Kasper Hovgaard Tuesday, February 21, 2012

    The main reason why a lot of both private and public customers are unable to move to pulic cloud based solutions is in fact: Legislation. At least in many European countries any company dealing with data that contains personal/sensitive information is only allowed to use private clouds, because they have to be able to account for: Who has access to the data? Where exactly the data are stored? Google or any other public cloud can’t provide those answers, so that is actually why public clouds aren’t an option for the time being. At least not as long as long as the legislation remains the same… That’s a goldmine for Microsoft obviously, and I wish things were different.

  42. Good article! For small businesses the Cloud is a great tool that we should be leveraging. Our company just migrated to Office365 ourselves and so far the move has been great, I am not sure how comparable it is to the Google apps, but thanks for sharing your experience!

  43. Andrei Ion Rinea Tuesday, February 21, 2012

    I bet you worked that IT person into the grave. Eff you.

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  45. Q: Why a marketing guy would tell an IT story?
    A: Because they sell cloud services.
    So shallow and pathetic

  46. “It took a single data analyst a mere five hours to migrate all of our data from SAP to the new systems.” — very very very very hard to believe

  47. LOL What a joke. So, 70 “savings” (in the first year!) is the NET savings? No way. Replace a lot of top-tier apps with completely non-comparable junk, sign up for never ending monthly and yearly subscriptions, and lose all control over troubleshooting. Great idea.

  48. zohar gilad
    cloud is future of IT industry

  49. I have questions about the claims of “shaving 70% of our IT budget”, since no actual budget data was offered. Did the savings come simply from reduced licensing and maintenance, or did you fire all of your technical staff, since one data analyst can do it all? It seems telling that you no longer employ your IT director who did such a great job for you.

  50. Zohar, we are the IT department for many companies between 10 and 200 employees. We are moving them in this direction all the time. The key thing that I think you had at your company was complete buy in from the management team and clear direction to the entire company that “this is the direction we are going in” and if anyone is not ready to fully embrace this direction, then they might not be in sync with the company’s goals. This is much easier at a just-spun-out company but can be done at an established company. The only times we have seen a cloud-centric roadmap not succeed at a company is when it is not made crystal clear to every employee that this change is critical to the company’s goals and that there is no turning back and that anyone who is not going in the same direction as the company needs to speed up right away and express their concerns.

    I think not enough companies give IT the respect your team gave it and it shows in your results and in the bottom line.

  51. To add to the savings, utility providers offer rebates to companies for hosted virtual desktops on a monthly, per user, subscription basis. It makes no sense for a company to buy IT assets anymore when solutions are here that are more secure, enable greater mobility, and are more efficient while saving around $600 a year per computer.

  52. Shave 2 million now and pay through the nose later.

    Once you are a captive customer with no longer the skills to administer servers … the once dirt cheap cloud will be dark and over you head.

    Enjoy now but be ready to go back to inhouse IT. The mainframe story is just a hint … cheap at on stage IBM is now cashing in on idiots that could not migrate their apps back.

  53. The claim that a data analyst migrated SAP to Saleforce in 5 days is beyond ridiculous to the point where your credibility and competence should be questioned.

  54. Rasitha Wickramasinghe Thursday, February 23, 2012

    This is a great cloud success story. @ Digital Saber we are cloud evangelists and this is music to our ears.

  55. Ah, right. I guess, mr. Gilad, you also did research who owns your data now?
    Who can have a look at your company data, whenever they want?
    And of course, you’ve also taken that since these cloud services are so big, they are very interesting for and under regular espionage attacks from foreign governments? And that these governments actually use the information they obtain? (see wikileaks for examples).
    If you have taken that into account, and have said ‘yes’ to the extra risks, I guess the savings were worth it.
    But I have to say, you make it sound much easier and way less risk full than it is. Companies need to do proper research and risk assessment before they move their data (which, for many companies is their most valuable asset) onto someone else’s servers.

  56. I agree the cloud has lowered IT costs. We’ve also seen it open time for CIOs to deal with more business strategy and less day-to-day data support. Choosing to implement a cloud backup/disaster recovery solution alone saves SMBs billions a year when outages happen. @continuitycentr

  57. If you any IT employees who are actually IT people. Outsourcing to whoever, whereever, on whatever is a bad move. No matter what a sale person sells you the person is disconnected with his\her IT staff. Build your own team and infrastructure. I didn’t even bother reading the article. The heading is too good to be true. I got a $3000 watch I can sell to you for $200 bucks. Its a better deal.

  58. Great article.
    If you also combine this with refurbished hardware you are even better of. Every workstation, laptop server and communication is much cheaper this way. http://www.alltrade.co.il is a possible partner I recommend.

  59. Brian Coverstone Monday, February 27, 2012

    Wow, sounds like this company was so bloated to begin with, anything done would have saved money.

    I work for a company with around 100 employees and support about 10,000 external users, and we spend a TOTAL of about $500,000 a year on IT. That is a mere 1/6th of this company’s budget. And we have been nothing but state of the art for almost 10 years.

    We have created our own “cloud” for our customers at this cost. Plus our SLA is higher than most standard clouds at 99.99%.

    It can be done.

  60. Brian Coverstone Monday, February 27, 2012

    A budget of almost $3mil a year for a company with 200 employees is absurb. Anything they did would cut their IT budget by 70%.

  61. I read the article and it’s kind of true as long as you don’t count their IT department as a cost and realize that they’ve opened themselves to a lot more risk than they had previously. They cut their budget and the solution was very low priced IT items, but in doing that they also lost a lot of the functionality that they were budgeting based on before.

    It’s like saying: I saved myself $50,000 by purchasing a bike instead of a truck. Technically, you’re exactly right – you did. But, get that refrigerator home from the store on your bike. You haven’t actually saved $50,000 when you count your time and the things you now can’t do. But if you don’t need those things, then you were paying for something you didn’t need to start, so you are saving yourself money not with the purchase of a bike, but with a needs evaluation.

    A company like theirs though, probably can save money in the cloud. They’re big enough to require redundancy, but small enough not to maintain that infrastructure in-house. As you reach into that market, cloud becomes more efficient because at that scale it is cheaper than building and maintaining your own redundancy. But when you don’t need server redundancy, you’re paying for it anyway and that’s why it’s not cheaper for many companies.

  62. Interesting – I know someone from this company and he doesn’t like the googls solutions at all – they don’t even have a backup in case you delete some emails from trash folder by mistake..

  63. Did the cloud thing. Data breaches and no control! Never again.

  64. Steve, have a read of this…

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