You wouldn't know it, but there are already more than 3.5 million people using the next version of Microsoft's e-mail software, Exchange 14.

At this point in the development of Exchange 2007, Microsoft had only 5,000 customers testing the product.

How can that be? Exchange 14 is the first version of Microsoft's e-mail application being jointly developed as both server software and as a service delivered to customers over the Internet. More than 1,500 colleges and universities are testing Exchange 14 for free as part of Microsoft's Live@edu initiative. Private testing of Exchange 14's server version is taking place among a smaller number of businesses and organizations.

Microsoft's chosen to begin testing with colleges because, Rajesh Jha, Microsoft's VP of Exchange development and Office Live, said in an interview, schools have both savvy users who will be the information workers of tomorrow and complex administrative needs. For example, Microsoft needed to balance the privacy demands of students and university admins with the need to manage inappropriate usage of the e-mail system, and so bulked up administrative features in Exchange 14.

The institutions are using Exchange 14 under the name Exchange Labs, a program first announced in May 2008. Among them are the Wharton School at the University of Pennsylvania, St. Johns University and a number of community colleges.

Microsoft won't go into much detail about exactly what's in Exchange 14 or when it's due out, but Jha did say that new features include content filtering to let admins block objectionable e-mails, message tracking to confirm delivery of an e-mail, the ability for end users to manage and edit distribution lists, and a new Web interface for Exchange administrators. Expect to hear more about Exchange 14's features by the spring, Jha said.

By testing out so many users on it -- with 3.5 million users, Exchange Labs has about seven times the number of Microsoft's current Exchange Online service -- Jha said Microsoft is able to get better feedback from customers, in order to do things like build more scalability into Exchange 14. More testing should mean a stronger final product. Plus, updates get out to customers early and often. Microsoft has been developing Exchange 14 for nearly 18 months, and customers have been live on some version of the software for 15 of them.

"One of the advantages of a service is that we have an ongoing conversation with customers," Jha said. "It's like we are the IT for our customers. We think this will benefit the management and administration features of our on premises version of Exchange hugely."

When Exchange 14 goes live, Exchange Online and Exchange Server 14 will share a vast majority of code, offering customers near-parity of features and easy migration of mailboxes between server and service.