In a bid to keep competitive in the era of cloud computing, IBM last week released Lotus Notes Hosted Messaging, a software and service version of Lotus Notes that includes hosted mailboxes and the Lotus Notes client.

New Notes customers get licenses for clients, while existing ones can apply their on-premises licenses toward the new service, which aims at companies with 1,000 to 10,000 employees. The service costs between $8 and $18 per user per month (sold on an annual basis) and comes with either a 99.5% or 99.9% service-level agreement. IBM handles back-end administration, including spam and virus filtering and backup and recovery, while an administrative console allows customers to do things like manage mailboxes and check uptime.

Right now, Notes Hosted Messaging does have some limitations. Customers can't yet use Notes applications and databases with the service, and there's a 1-GB-per-user mailbox limit. IBM hopes to add Notes application support soon, as well as support for Web-only users and an archiving service so that when users go beyond 1 GB, they don't have to back up their archives locally. "We're going to iterate quickly," said Ed Brill, a director with IBM.

IBM joins Microsoft and its new Exchange Online service as the two big dogs in e-mail as a service. Microsoft's Exchange Online is priced at $10 per user per month. Like Microsoft, IBM recently released a number of hosted collaboration services (including Web conferencing and social networking), but IBM has yet to come up with a broader brand for its services offerings. That's in the works, as is some integration among them. Also like Microsoft, IBM risks alienating partners who already host Notes, but Brill said there's room to share and some of the partner-hosted Notes versions are more scalable than Notes Hosted Messaging will be initially.

By combining both a software element and a service, IBM is taking another page from Microsoft, whose "software plus services" strategy touts both that blend and choice between on-premises software and cloud computing. Even many largely software-as-a-service-focused companies, such Salesforce.com and Google, have downloadable software and offline modes in their portfolio of products.

Existing Notes customers can use the clients they already have with Notes Hosted Messaging, which works with both Notes 7 and Notes 8 clients.

The security model for Notes Hosted Messaging is a continuation of the on-premises security model of Notes.

"The great thing about this is that it's part of the core DNA of Lotus Notes to have a dual-factor public key authentication in the product, and we have end-to-end encryption from the client straight through to the server," Brill said.

The company describes its data center architecture for Notes Hosted Messaging as a "hybrid of single and multitenancy with some characteristics of both." The software resides on virtual machines, but isn't entirely multitenant, in that virtual instances are isolated from one another. The software won't reside in just one IBM Global Services data center, but several. IBM will use existing data center infrastructure to host the application.

Notes has taken repeated hits in market share from Microsoft, though Brill said revenue for both the client and server continue to grow. IBM will release Lotus Notes 8.5, which focuses on simpler administration and easier application development, by the end of the year. Early next year, IBM and SAP will release the first version of Project Atlantic, which brings some SAP features like time off and system reporting into Notes.