With an in-house solution your company must supply infrastructure, networking, security, system and email skills. Depending on your needs and your available staff this may be part-time for a single professional or it may require multiple FTEs or even outside consultants.
The total time necessary to manage an in-house email system will vary dramatically and is often very hard to calculate due to the complex nature of the situation. But at a minimum it is orders of magnitude greater than a hosted solution.
Security is the final significant consideration. Beyond traditional system-level security email requires spam filtering. Handling spam can be done in many ways: in software on the email server, on an appliance located on the local network, farmed out to a spam filtering service or left to the hosted email solution provider.
Spam filtering, if handled internally, is seldom a set-and-forget service but one that requires regular attention and generally extra cost in licensing and management.
After looking at these main considerations every company should sit down, crunch the numbers, and determine which solution makes the most sense for them on an individual level. Often it is necessary to use a spreadsheet and play with several scenarios to see what each solution will cost both up front and over time. This assessment of valuation of features and their applicability to the company will be critical in determining the appropriateness of each option.
The secret weapons of the in-house solution are features, integration and flexibility. In-house email options can be extended or modified to offer exactly the feature set that the organization requires - sometimes at additional cost. A perfect example of this is Zimbra's instant messaging integration, which can be a significant value-add for an email platform. This has to be considered in addition to raw cost. Integration with existing internal authentication mechanisms can be an important factor as well.
In my own experience and cost calculations, hosted solutions represent the vast majority of appropriate solutions in the SMB space, due to raw economics. In contrast, large and enterprise class customers will find unbeatable benefits from the flexibility and internal communications advantages of in-house solutions.
Small businesses struggle mostly with cost while large business struggle primarily with the communications complexity of their scale. Large businesses also get the best value from in-house solutions due to "professional density" - the inverse number of IT professionals whose time is wasted due to corporate scale inefficiencies.
Today, whether a business chooses to host their own email or to receive email as a service, there are many options from which to choose even once a basic architecture is chosen.
Traditionally only a few in-house options such as MS Exchange and Lotus Notes would be considered. But new alternatives such as Zimbra (recently acquired by VMWare,) Scalix and Kerio are expanding the landscape with lower costs, new deployment options and aggressive feature sets.
Hosting's relative newcomer, and overnight industry heavyweight, Rackspace, is drawing a lot of attention with their new email offerings. Rackspaces solution more closely mimics traditional in-house offerings, while Google continues to get attention with their unique GMail services. I expect to see the hosted email space continue to become more competitive with new integration features being a key focus.
Every business is unique and the whole of the factors must be considered. Using a combination of business and IT skills is necessary to evaluate the available options and opportunities. No one consideration should be used to make these decisions in isolation. This is a perfect example of where IT managers must understand the economics of the business in addition to the technological aspects of the solution.