Will Microsoft Exchange 2003 be a good vintage?

A new version of Microsoft's Exchange communications software has entered a second round of testing, the company said yesterday.

The Redmond, Washington-based company said the new version, code-named Titanium, will be called Exchange Server 2003. Microsoft plans to release Exchange Server 2003 and the next version of its Outlook email software, code-named Outlook 11, around the middle of this year.

The new test release of the software is an important milestone for Microsoft as it strives to deliver the product on time, said analysts. The new product - which manages email, calendars and contacts - competes with software from IBM and Novell, among others. In October, Lotus founder Mitch Kapor said he was developing a free, open source alternative to Outlook.

Many of Exchange Server 2003's new features work best with Outlook 11, which is expected to be available with Exchange Server 2003 and the next version of Microsoft's desktop productivity suite, code-named Office 11. Microsoft plans to release Office 11 around mid-year.

"The real benefits come with the new version of Outlook," Gartner analyst David Smith said. "It's one of those things where enterprises get one piece but won't get the real benefit until they get the other piece."

Microsoft has enhanced the Mail Application Programming Interface (MAPI), so that remote workers or telecommuters no longer need a virtual private network (VPN) connection to check email on an Exchange server.

The software maker has also has beefed up security and added support for many types of wireless devices, including those using Microsoft's Windows Pocket PC or Smartphone software, microbrowsers and Wireless Access Protocol (WAP) 2.0.

Microsoft said half of its 60,000 employees and contractors are testing Exchange Server 2003. The technology titan has had a longstanding practice of running software internally well ahead of its official release. In autumn, Microsoft started running all of its websites on Windows .Net Server 2003, a new version of its server operating system currently in beta testing and scheduled for an April release.

Microsoft is positioning Exchange Server 2003 as a way to consolidate existing communications servers. The company asserts that in internal testing, new compression technology available with Exchange Server 2003 and Outlook 11 led to data transmissions between 50 and 70 per cent smaller than with previous releases of the software.

Microsoft is using the performance gains to consolidate 70 Exchange sites worldwide down to an expected 20 sites by the end of the year. For example, Microsoft said it is moving from nine Exchange sites supporting 6,000 European employees down to a single one in Dublin.

Joe Wilcox writes for CNET News.com.