Host Your Own SMTP Server Or Use a Provider: Which Is Better for You?

Let’s imagine you’re the owner of a thriving accessories shop. Business is good — you’ve built up a solid customer base of around 50,000 contacts, and you’re processing a few thousand orders every month. Now, you’re finally ready to take things to the next level with email marketing. You’ve heard about how email campaigns can work wonders for keeping customers engaged, boosting sales, and keeping your brand top of mind. But before you dive right in, there’s a big decision to make: should you invest in your own email server or opt for an email service provider (ESP)?

Your initial estimate is that you’ll be sending a newsletter or promo to all of your customers twice a week, which totals to about 400,000 monthly emails. In addition, you’d like to set up some automation to notify customers of their purchases, offer special birthday discounts and so on, which adds another 100,000 emails per month, with a cap of about 60,000 messages per day and 10,000 per hour.

It’s tempting to think that sending a few emails isn’t that big of a deal (and perhaps the server you already use for your website could easily take the extra load). But even with a few thousand contacts, things can get complex quickly. Sending out marketing campaigns in bulk requires reliable infrastructure to make sure your messages actually land in inboxes, instead of the dreaded spam folder. Plus, you’ll need to manage subscriber lists, track campaign performance, handle bounces, and make sure you’re compliant with all the rules about email marketing. It’s not just about clicking “send” — there’s a lot more going on behind the scenes.

So, here’s the big question: do you host your own email server, or do you leave it to the pros and sign up with an email service provider? Both options come with their pros and cons, but since your shop is a business and not a tech company, the first thing you’re probably thinking about is cost.

ESP vs In-House: Cost Breakdown

Here's a detailed plan for comparing the costs of setting up an in-house email server versus using an email service provider (ESP) for managing your 50,000-email customer base for marketing campaigns. You may use it as a starting point for your own evaluation – just pay attention to the notes for each section, as your particulars may have a big influence on the final result. We'll break it down into initial costs and ongoing costs for both options.

1. In-House Email Server

Initial Expenses:

Hardware:

Email Server (Dedicated or Virtual Machine): $1,000 - $5,000 (depends on scale, redundancy, and backup solutions)
Storage (RAID configuration recommended): $500 - $2,000
Networking Equipment (firewall, switches, etc.): $500 - $1,500
Backup System (external drives, NAS): $300 - $1,500
Power Supply (UPS for redundancy): $200 - $1,000

The above list is definitely an overkill for your current needs, and you may just purchase a second-hand server instead for a fraction of the cost. If (and only if) you set up a reliable backup system (including real-time backup of server logs), then the only question is whether you can tolerate a one-day downtime if your inexpensive solution suddenly goes south, to be promptly replaced with a similar one. Another consideration is whether your customer base is going to grow rapidly, justifying hardware purchase “for growth”.

The final estimate for this category will fall between $2,000 and $11,000.

Software:

Email Server Software (like Postfix, Sendmail, or Microsoft Exchange): $0 - $1,500 (you may go for an open-source solution or buy proprietary software)
Operating System Licenses: $0 - $1,000 (while Linux is free, Windows Server licenses are not)
Extra Tools: $0 - $2,500

Contrary to popular belief, open source products are often as capable and feature-rich as commercial ones. In our scenario, purchasing an MS Exchange license can probably be justified only if you already have it as part of your existing IT infrastructure. However, you may also need some extra tools: while you may use a free editor and an open source database to manage your lists and create newsletters, you’ll need to do some scripting to make things work – or purchase a suitable commercial product.

The final estimate for this category will fall between $0 and $5,000.

Setup and Installation Costs:

IT Personnel or Consultant: $5,000 - $15,000 (for initial setup, depends on complexity)

This estimate is gonna be an unpleasant surprise for you. Indeed, setting up a mail server should basically boil down to launching an installer and adjusting a few settings, so why this ridiculous price tag? The problem is, general purpose SMTP server software is not well suited for specific email marketing tasks. You need at least some rudimentary log analyzing capabilities, just to know which customers have received your email and which ones didn’t. Most importantly, you need a way to constantly monitor your logs for any mention of blacklisting or spam blocking, as such mishaps can severely impact your email marketing performance and will require immediate actions. While one may find an existing open source script for this task, it will require extensive modifications to work with your system. And we’re talking just basic functionality here, without any fancy reports, click tracking, etc.

Ongoing Costs:

Maintenance and Support:

IT Personnel: $10,000 - $20,000 per year (part-time administrator for server maintenance, security patches, and updates, estimated at 4-8 hours weekly)
Hardware Upgrades and Repairs: $500 - $2,000 per year
Software Updates and License Renewals: $0 - $2,000 per year
Security (Firewalls, Anti-virus, and DDoS protection): $500 - $2,000 per year
SSL Certificates: $100 - $500 per year

Bandwidth and Power:

Electricity Costs (for 24/7 operation): $100 - $500 per month
Internet Connection (if dedicated connection is needed for outbound email traffic): $200 - $500 per month

Reputation Management:

Additional staff time and effort: Variable costs for ensuring that emails don't get marked as spam

The final estimate for this category will fall between $11,400 and $27,500 per year.

2. Using an Email Service Provider (ESP)

Initial Expenses:

No Hardware Costs: The ESP provides all the infrastructure
Setup and Integration Costs:

Consulting/Setup Fee: $0 - $2,000

Usually this category totals to zero, but let’s be generous, as we are apparently saving big here already. Some services may be quite challenging to master quickly due to a large number of complex features, so it is quite reasonable to set aside some $2,000 for personnel training.

Ongoing Costs:

ESP Subscription Costs:

Basic Plan: $250 - $700 per month (for 500,000 monthly emails)
Advanced Features (automation, segmentation, A/B testing, analytics, deliverability monitoring): $0 - $2,000 per month (depending on the provider, these features may be included in the basic plan)

IT Personnel, Reputation Management: $0 – ESPs handle maintenance, software updates, and security.
Support and Customer Service: $0 - $500 per month (basic support is usually included, with premium support available for additional fees).

The final estimate for this category will fall between $3,000 and $38,400 per year.

Cost Comparison Summary

In-House Email Server:

Initial Costs: $7,000 - $31,000
Ongoing Costs (Annually): $11,400 - $27,500 (not including reputation management expenses)

Using an ESP:

Initial Costs: $0 - $2,000
Ongoing Costs (Annually): $3,000 - $38,400

In total, an ESP can eventually turn out to be more expensive in annual costs than a private email server. However, on a closer look, this may occur only when a customer needs advanced functionality which an in-house system cannot provide anyway.

Other Non-Monetary Considerations:

Scalability: ESPs are much easier to scale without significant additional investment, while in-house servers may require costly hardware upgrades.
Deliverability and Reputation: ESPs constantly monitor IP reputation and use dedicated systems to ensure emails don’t go to spam.
Flexibility and Control: In-house systems give more control over email content, but require tedious management of IP reputation, blacklists, and deliverability.
Compliance: ESPs usually handle GDPR, CAN-SPAM, and other regulations, while an in-house server may need custom solutions to ensure compliance.

Conclusion

Setting up your own email server might give you more control over your marketing, but it comes with hefty upfront costs. There’s hardware to buy, software to install, and you’ll need an IT team (or at least a seriously tech-savvy person) to manage and maintain everything. That includes keeping your server up and running, making sure it’s secure, handling updates, and ensuring that your emails don’t get marked as spam. On the plus side, you own everything outright, and there’s no monthly service fee — though the ongoing costs of managing your system can add up.

On the flip side, going with an ESP means you don’t have to worry about all the tech stuff. Services like UniOne, Constant Contact, or Sendinblue make it easy to set up and send out professional-looking campaigns without the hassle of managing your own infrastructure. They also handle things like deliverability (so your emails actually reach your customers), compliance with regulations, and provide all kinds of useful analytics. But, of course, there’s a monthly fee, and that fee grows along with your contact list and sending volumes.

Which option is right for you depends on a few things: how much control you want, what kind of budget you’re working with, and how much time (and patience) you have to deal with the technical side of things. In this comparison, we’ve taken a closer look at both choices from a cost perspective — breaking down what it takes to get an in-house email server up and running versus the expenses involved in using an ESP. You should now have a clearer picture of which route makes the most sense for your business.