Do Office 365 integration now (2003) or after upgrade (2012 R2)?

Question

A client has Server 2003 Standard and are going to migrate to Office 365 very soon (from a hosted mail provider, POP). They are also due for a server upgrade, likely Server 2012 R2 Standard. To eliminate the hassle of managing two different systems for their
Windows accounts and email accounts I thought I'd run Federation Services for the Office 365 integration. The problem is they are still trying to find a way to budget for the server upgrade, so it's starting to look like I may have to integrate O365 with 2003
instead of 2012 R2.
I assume its better to integrate Office 365 with 2012 R2 than 2003. If so, why?
If I do integrate with 2003, what type of issues can I expect when I finally upgrade to 2012 R2 (i.e., link between AD or federation services and O365 break, can't manage email from Server 2012 R2 dashboard because feature wasn't available in 2003)?

Answer 1

The most important question is, "Does your client currently use Exchange 2003?" Next question is, "Are they planning on running a hybrid Exchange setup?" Information about the current server(s) and its/their role(s) would be good to know too.
At our workplace, We had a 2003/2008/2008 R2 server cluster, with one of the 2003's running Exchange 2003 with 500 mailboxes. If I had known then what I know now, I would have run a cutover migration ASAP. Our AD wasn't current in the Users and Computers
section, so we thought we'd save money by cleaning up the directory, then run a hybrid with the complimentary version of Exchange 2010 that comes with O365 E3. After a while we realized that there were no real advantages for our company to run the hybrid,
so we decided on a cutover. During that conversation, our Exchange server died. We went online with a CSV dump of the AD, archived the old database, and imported PST's on demand.
I take it since your client is strapped for cash, the won't be doling out for Exchange 2010 or 2013. You may also know by now that Exchange 2003
will not run on any edition of Server 2008 or 2012, so they're going to have to drop it.
So, the gameplan I propose to you is this:
1) If you have less that 1,000 mailboxes, run a cutover migration ASAP. If you have unused accounts, clean them out after you make the migration and cancel them in the pricing. The web panel is really easy to use, and the Powershell module is great too.
2a) When (or if) the client is able to acquire 12R2, check the DC first. Some companies have internal domains named "domain" or "company.local". If they plan to do AD Synchronization (I guess for Single Sign-On), that's not going to work. The FQDN must be
mapable to a top-level Internet domain (e.g. .com, .org, .net), and they may have to create a new domain (or even forest) to become compliant. Check this now, and factor it into your pricing.
2b) If 2a is an issue, you may have to install 12 on a separate machine/VM because two forests can't reside on one DC (security issues). If not, upgrade the DC.
3)Run the AD check to make sure the domain is good for synchronization, then sync.
4)It is highly recommended that you do not run federation services on a domain controller, because that would expose it to web traffic. See: http://technet.microsoft.com/en-us/library/cc778681(WS.10).aspx . If possible, run it on a separate machine. 12 Standard
comes with two licenses for 12 running on a Hyper-V host, so you may consider that if the hardware permits. Keep in mind there can be issues with running a domain controller on a virtual machine (I do, and while I know it's not the most secure setup in the
world, most of our firewalling is done at the hardware level). Decide on how you want to situate FS, then bring it online. Recommended practice is to have it in a DMZ, and of course you shouldn't put a DC there.
5) Make sure your certs are good (you have to use a separate subdomain [e.g. fs.company.com] for FS than the internal one), then activate FS. Remember that certificates costs money, but you should only need a domain validation one.
Truth be told, I wouldn't recommend FS for a client that can't afford Server 12. Sit down with them and ask for concrete examples of what they presently do and what they are trying to do. Also ask them if they have the staff to maintain an Active Directory
that is bound to O365 (probably not). During this talk, do not use words like "sync" and "cloud"; they are buzzwords that are certainly misguiding the decision makers. You do not need to have federation in order to use OneDrive with your desktop Excel or to
"access your files from anywhere". If they start to do a lot of SaaS in the future, then they may want to reconsider.
Final Note: Don't bother doing anything with 2003 if you can avoid it. Scrap it as soon as you can. Microsoft ended support for it on the 8th, and O365 support isn't going to help you with it when you eventually need to call (and you will).