Microsoft's Outlook.com may be one-two punch against Google

Updated email service could beef up Microsoft's cloud-based enterprise effort

Microsoft's new email service, Outlook.com, is more than an update to its free email offering. It's also a one-two punch against major rival Google.

On Tuesday, Microsoft took the wraps off its new webmail service, which eventually will replace the highly popular Hotmail. The updated service is a big redesign that allows Outlook.com accounts to be synchronized across a range of devices, and includes integration with social networking sites like Facebook, Twitter and LinkedIn.

"While many people, particularly younger people, rely more on social messaging than email, email is still the preferred method for long-form communication," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "Microsoft wants desperately to run away from Hotmail.... Hotmail got very stale with its feature set and needed to be replaced for this decade's use of richer media, like photos and video, social connected accounts, video communications and chat."

While Microsoft plans to replace Hotmail with Outlook.com, the company also is hoping that it will replace Google's Gmail service for a lot of people. And that would be a blow to a company that has become one of Microsoft's main rivals, competing on several different fronts, including free email services, search, browsers, operating systems and cloud-based enterprise apps.

"This is certainly a competitor to Gmail and, from what I can tell, a very solid competitor," said Dan Olds, an analyst with The Gabriel Consulting Group. "Hotmail still has more users than Gmail, although the gap is closing. And Microsoft wants to maintain that lead, if not expand it."

However, that isn't Microsoft's only goal here, according to Olds.

The second blow in Microsoft's one-two punch is to beef up its suite of cloud-based apps for the enterprise, which is a major point of competition with Google and its Google Apps.

For now, Microsoft is billing Outlook.com as a consumer tool. But Olds said not to be fooled by that. Google's Gmail has been billed as a consumer service but it's acted as a gateway into the company's own enterprise apps for a lot of firms.

Olds also noted that Outlook.com could be upgraded to become a full-fledged enterprise app in the not-so-distant future.

"What's interesting is how this new email platform will help to draw attention and act as a springboard into Microsoft's emerging cloud offerings," he added. "A revamped Outlook.com should help Microsoft convince more users to add cloud functionality to their current Microsoft Office installations and thus convert a significant percentage of them to paid subscribers."

Microsoft and Google have been sparring over the enterprise cloud-based app market for a while. There's a lot of money to be made selling to corporate customers and both companies want a piece of that pie.

Microsoft has had an advantage because its Office suite of locally installed work tools have long been the dominant player in that market worldwide. However, Google came to the cloud party earlier than its rival, giving it a head start.

With both companies trying to pull in enterprise users, a socially aware, advanced email service like Outlook.com could be a good entry point for companies.

"Over the long haul, Outlook.com is designed to take customers away from Gmail, but Microsoft needs to first establish that they are in the game," said Moorhead. "I do think Microsoft is in the game with Outlook.com and if the company can promote its independent social features it could pull people from Google."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed. Her email address is sgaudin@computerworld.com.

See more by Sharon Gaudin on Computerworld.com.

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