How Should One Respond to a Network Break In?

Jety asks: "I am the sole IT support for a medium sized residential real estate office. It has a network of one main server, 10 office workstations, and another 40 or so agent's personal computers. I discovered via logs that recently someone made about 50 remote login attempts to the server, guessing at passwords, but it would appear that they were not able to gain access. They did, however, leave an IP address in the logs. It turns out to be an Exchange server for another business in the same city. What is an appropriate response to this sort of failed break-in attempt? How seriously should one react? How should it be presented to management, and should you encourage them to over or under react? Should the other business, whose server was used to launch the attack, be informed? Should you try to surveil them first to learn about who is doing their tech work? With what tone should they be approached and/or accused? What would a suitable response from that company entail?"