What's Your Story Idea? October 18, 2009, 9:00PM EST

Web-Based E-Mail: Businesses Beware

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The idea for "Web-Based E-Mail: Businesses Beware" came from BusinessWeek reader Rom Mattesich, a retired telecom engineer who helps run a family-owned construction company in Florida.

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Service can fail for hours on end, messages can be delayed or lost entirely, and often there's little or no recourse for the customer who has suffered losses in both data and productivity. On Oct. 13, Google's (GOOG) Postini spam-controlling service held up the delivery of mail to customers of the Google Apps e-mail service for several hours. In February of last year, Microsoft's Hotmail failed for users both in the U.S. and Europe for as long as six hours. And in 2007 some 4.5 million e-mail messages stored for 275,000 users of Yahoo! Japan were erased by mistake. Recently, Microsoft has taken flack for losing data, including e-mail and contacts stored by uses of T-Mobile's (DT) Sidekick smartphone.

At the very least, business owners should take the time to do some due diligence. Ask questions about what happens if there is an outage. When they occur, the terms-of-service agreement—that big block of text no one bothers to read before signing up for a new account—almost always limits the provider's liability. For example, a section of Google's terms of service for Gmail states the company is not liable for any damages or loss of profit or harm to business reputation that results from use of the service. "The problem is that when something goes wrong, these companies are so small that they don't have a lot of leverage with the vendor to get things fixed," says Sarah Radicati, head of Radicati Group, an e-mail and messaging market research firm based in Silicon Valley. Big companies, on the other hand, cut detailed service arrangements with their vendors that spell out in excruciating detail what happens when some aspect of an e-mail system fails.

"the rule of three"

Businesses should also be aware of potential legal pitfalls. If messages containing information valuable to a client or customer are lost, you can be sued under a number of legal theories, says Robert Brownstone, a director of technology for the Silicon Valley law firm Fenwick & West: "If they need the information and it has value, they can sue you, claiming you didn't exercise reasonable care." Reputable hosted e-mail providers will lay out their backup policies, says Andres Kohn, vice-president of technology at Proofpoint, a firm that provides e-mail security and archiving solutions to large companies. "You have the right to ask a vendor what their disaster-recovery policy is and how they ensure they're not going to lose your data." For complete peace of mind, Brownstone suggests a "rule of three" approach that involves backing up e-mails and other important information onto a local hard drive and at least two other places. "If you don't have your data in three places, then you're not sure you have it."

Given the number of Web-based e-mail services that have sprung up in recent years, it pays to shop around. "These services offer a great advantage in that there's someone running the servers day and night who knows how to take care of them and who's doing the automatic backups and upgrades," says Radicati. And like anything else, good service comes at a price. Charges of $10 to $20 per user per month are typical but can go higher depending on features.

So where does that leave Rom Mattesich and his e-mail woes? Kirk Gregersen, Microsoft's senior director for Office Live Small Business, promised to "get engaged directly" with Mattesich to try to help solve his problems. "The communications in terms of this incident could have been a lot better," he says. "The lifeblood of the service is satisfied customers who refer others to the service. This is the type of thing we take seriously."

Hesseldahl is a reporter for BusinessWeek.com.