I stumbled on a post entitled Using Gmail for work from Rakesh Agrawal, President and CEO of Snapstream, about switching from Microsoft Outlook and Exchange to GMail for his work email. He writes

After going through my fourth or fifth Microsoft Exchange crash and countless Outlook problems (after 3 years!), I decided that I had had enough. For a little over a month, I've been using Gmail as my primary client for e-mail -- for work e-mail, for personal e-mail and everything in between. So far I love it, though I've discovered that there are also a few things that make it undesirable. Read on for the details...

The Benefits

For me, there have been countless benefits of running email in the network cloud and not on a local client on my PC. Let me count the ways...

• - No more crash-prone exchange server or outlook clients:
  
• - Access from literally any computing device with Internet access:
  
• - Gmail Mobile (m.gmail.com):
• - reliable and effective search:
• - spam filtering is really, really good
• - filtering is fast, simple (just like search):

The Downsides

• - E-mail accounts functionality could be a lot better:
• - m.gmail.com doesn't support "accounts":
  
• - No offline access:
• - It's not a local application:
• - Space limitations:
• - Formatting limitations:
• - Occasional hiccups of service:

Most of his complaints seem to be already fixed in existing versions of Exchange. I often access my Outlook mail using the Outlook Web Access functionality that has been a part of Exchange for years [and is the reason XMLHttpRequest exists in the first place]. In fact VPNing has been such a hassle for me at home that I often resort to a combination of OWA and the RPC over HTTP feature of Outlook 2003. I get mobile access fine from my Audiovox SMT 5600 phone which syncs both my mail and calendar which has quite literally changed my life. Of course, it does mean that I check work email when I shouldn't such as when I'm at airports supposedly on vacation.For search, I use Windows Desktop Search which works great. However it is a fair point that there is no decent equivalent if accessing mail from the Web or a mobile phone. 

I found this post via Nathan Weinberg who addresses the offline problem in his commentary on Rakesh's post by adding

So, how can Google address his caveats? The biggest seems to be an offline version of Gmail, something Google has not indicated it is developing. I think the Windows Live Mail Desktop solution is the way to go, designing a light, yet very well featured desktop email client that is clearly designed to work in conjunction with web-based email, not as a replacement.

I totally agree with that approach because it marries the best of the Web and the desktop instead of one trying to replace the other. This topic points out the kind of interesting tensions that I believe exist at Microsoft today. The Exchange team should look at posts like Rajesh and wonder how to stay competitive with Web-based solutions but I suspect they also wonder if products like Windows Live Mail and Office Live aren't cannibalizing their business. Ideally, we should offer a continuoum of products which should include Web-based offerings for companies that don't want the hassle/cost of managing their own mail servers to enterprise offerings for the bigcos who can't fathom why any business wouldn't want all their mail to be processed and stored in-house. This seems to be the tack that we are taking today, which is great, but it definitely leads to interesting conversations.

One size doesn't fit all. Always remember that. 

NOTE: I inserted the link to the Windows Live Mail Desktop team's blog to Nathan's post.