Our user's email files continue to get larger requiring greater amounts of disc space.
We do ask users to archive some of their email and compact the files but there is always a percentage who ignore this. And another percentage who feel that we do it deliberately to annoy them!
There's also a trade off between the cost to the business of people doing archives (some of which result in calls to the help desk) and the smaller cost of simply getting a bigger drive.
What procedures do others follow to resolve this?
We had the same problem with Exchange 2000, users mailboxes would get too large and the Exchange Server wouldn't cope.
The eventual solution was to upgrade to Exchange 2007, some users have a legitimate need for long term archiving and archiving these on the server (and having IT take care of backups) is more reliable than having an archive.pst that could be wiped out with a disk crash.
Our CFO for example recently lost 5 years worth of archives in a disk crash, as they have been archived off of the server and onto his local PC - our server side retention policy (due to Exchange 2000 limitations) was 3-months, when anyones mailbox started to approach the 1Gb mark the IT staff would go have a chat and archive the mail off themselves if required.
If upper management lose any email or archives, it doesn't matter what the 'policy' is, the IT staff will end up shouldering the blame. If you explain things clearly to management, chances are they'll make room in the budget for improved email retention if it makes their lives easier.
If you can afford it, it may be much easier for you to install an Exchange server.[1] Then all the mail is stored on-server and you can set quotas for each user.
[1] Technically there are some third-party Exchange-like solutions that are cheaper, however I've never used any of them and can't comment on their ability to set usage quotas on a per-user basis.
The standard recommendation is to give them a large enough mailbox for normal work and have a retention policy. The retention policy is also advantageous for legal reasons, if you're in the US (if you don't claim to have it and make a policy of purging it, discovery can't find it). After that, email archival so that only X days are actually present in the Inbox/Sent Items.
There is a setting for this which you can easily enforce via group policy, see here fore more info: http://support.microsoft.com/?kbid=832925