Why should a small business company have its in-house mail server?

In My Humble Opinion.. It shouldn't.

Managing a mail-server, properly, is a massive ball-ache. We have 40 odd users, and use GAFYD (Google Apps For Your Domain). It works perfectly. We don't need Exchange or any of that Microsoft Bloatware.

It's nice not to have to worry about spam, or anything like greylisting. I'm very happy GAFYD. I can also highly recommend a hosted Zimbra solution, that I used at $job-1

I will add, further to this, that for sending mail from the servers, we use AuthSMTP, which also, just works. There's loads of companies who do mail hosting, relay, spam filtering, and so on for a dayjob, so they can do it better than you can. Concentrate on what you do, and do it well, and let someone else worry about that tiresome stuff.

I don't work for either Google, or In-Tuition, or Zimbra.

There are a number of reasons why you might want (or need) to have a local mail server. Here are a few:

Control: your mail server is run your way, with no unexpected changes.

Security: even if you are setup so that not-specifically-encrypted mail from your clients is transported securely rather than in plain text it will probably be stored plain on the server. If your mail server is hosted by someone else then they can potentially read everything. Depending on your line of work and your clients this could be a major issue. We do work for banks who demand a security audit of all equipment their data and documentation will be stored on and background checks for people who will have access to that data and/or equipment (as the data could contain both business sensitive information and customer details, the customer details meaning they are legally obliged to require this level of assurance) - I doubt Google would let us run such a security audit on them or run one themselves and provide us with relevant documentation!

Reliability and Accountability: do external services provide good enough up-time and other reliability garantees with sufficient redress to your company if they fail to meet those service levels?

Locality of Reference: if you are all (or most of you are) based in the same office then having the mail server in that office can be an advantage. It'll be faster to access (though that is only really relevant for large attachments or if you have a particularly slow connection) and your stored mail will be available even if your Internet connection falls down for a time.

Access to Backups: assuming you have a good backup regime (and you should or you are putting your company at great risk) you have a chance of retrieving accidentally (or maliciously) deleted mail/folders/accounts. With most external services you will not be able to do this - their backups will be used to do a complete restore if needed due to major catastrophe and you are unlikely to be able to restore individual items yourself (aside from deleted mails that are still sat in the relevant trash folder).

Of course (as others have already pointed out) running a mail server well can be quite a task particularly keeping an eye on security issues and the setup, monitoring and testing of a good backup regime (including on-site + on-line backups, off-site backups and off-line backups) - so if none of the above particularly apply to you (or you can live without them in exchange for the easier life) then a hosted mail solution is the better option.

No erason. Even ignoring thigns like gmail, hosted exchange is a viable alternative.

Unelss naturally youare an IT heavy company anyway (which has many servers etc. becasue it is their business, or a small ISP what runs email servers anyway).

You sometimes may have to host your own mail systems because you need to be able to know exactly where you data is, geographically speaking. It happens a lot in the banking world.

If you've got people trying to use it for shuffling large files around (or users that just have huge mailboxes) who you can't get to change, having it on-site gives a dramatic improvement in performance.

I generally don't recommend it anymore, but there are still a few cases where it's best to do it yourself.

I agree with Tom O'Connor. Managing any server well is a lot of work, but it's especially challenging to manage a mail server well. You have to consider availability, security (including spam filtering), keeping your domain off of email blacklists, mailbox management, and patch management. (Did I forget anything?) You can get shared calendars, messaging, and similar services through GAFYD or other providers. At $50 per user per year for 40 users, it's much less expensive to use a hosted solution than investing in the required equipment and devoting your time to managing in-house email services.

It's all about how much control you want and need, and exactly how you use email as a business. There's often no reason for a small business to have email onsite when all you use it for is to email external customers. There's usually little benefit to having email available 'internally' in a small business with everyone working in the same office, etc.

The only possible exceptions to this is where your business is IT itself and there might be a certain amount of 'political' advantage to running your own services on site to 'prove' your technical chops to customers, or if you want to do lots of customisation and integration of fancy features into your email system.

Where I work we're a lot larger and use email quite heavily for internal communications - for us the equation changes somewhat because it would be a major disruption for internal email to be unavailable just because internet connection was down.

From an end user point of view internal, external and regardless of platform (exchange, gmail, etc) shouldn't really matter - they'll just access their email using whatever method you give them.

Small businesses that manage their own internal email servers generally deploy their capital poorly.

While having reliable email is important to a company, usually an IT department is not part of the company's strategic goals. It is simply a cost-center. Why would you invest so many resources to get email when all you need to do is outsource to an email hosting company for under $10/mo per account?

By outsourcing, you can still obtain security, control, visibility, reliability, access to backups, archiving, encryption, data leak prevention and more. All that without all the cost and headaches of having to manage a pain-in-the-butt email server and storage system.

There are many options in hosting companies from those that host Zimbra and those that host Office365. Both options offer a much more affordable solution than an in-house email server. Of course, if you have a much larger company, an in-house server makes more sense, assuming you are willing to invest in redundancy and a proper infrastructure.

Because Gmail Google (and the other big US companies) have become unreliable, security-wise. Which is a pity since they do offer the best bang for the buck in technology solutions. Not that it is easy to get a secure email solution (secure as in privacy) in any context, in-house or otherwise.