Microsoft’s recent Hotmail upgrades see the company trying to win back users, but will they succeed?

Microsoft has been steadily rolling out a number of Hotmail updates over the past year that bring a more desktop-like experience to Hotmail and cater to its more demanding users. The improvements even include a Google Android app to help Hotmail compete against its biggest rival, Gmail. “We really kind of lost our way a little bit,” admitted Microsoft’s Mark West in an interview with WinRumors last week. “Gmail came out, they were doing some great stuff especially around storage and they were really being very disruptive and got an awful lot of traction off the back of that.”

The frank admission shows that Microsoft has learned from its mistakes. The company was comfortable with Hotmail and sat back whilst Gmail arrived and offered some superior features and ease of use. “We lost our focus on the end user,” said West. “We’ve recognized that and realized that we have to make a lot of changes.” Microsoft’s changes over the past year have been impressive and truly focused on end users but how does the company shake a mind-share image that Hotmail sucks? “We understand that there’s still a perception that Hotmail is slow, spammy, lacking on storage – essentially outdated,” says Hotmail program manager Matthew O’Day in a blog post on Thursday. “We looked at that as a challenge,” says O’Day, a true upgrade to go above and beyond the problems Hotmail faced.

“It’s always been a goal of ours to make Hotmail feel more like a desktop application,” reveals O’Day. The goal is clear from the vast number of Outlook-like features that have moved across to Hotmail recently. “We’ve borrowed interface elements from Outlook (e.g., the reading pane, right click/drag actions), we support pinning to the Windows 7 taskbar with Internet Explorer 9, and, of course, Hotmail is great for managing e-mail from your other POP-enabled accounts.” Microsoft’s changes to a more rich desktop experience also require performance enhancements. The company has enabled pre-loading and caching to speed up Hotmail significantly. The result is a 10x speed improvement across a number of features compared to Spring 2011. Hotmail’s spam problems have also improved. Today the company blocks more than 98% of spam from inboxes. That’s 35% less than in 2006.

The results are a cleaner, faster and feature rich Hotmail for 2011. The changes are a testament to Microsoft’s ability to respond to competitors products with a range of its own features that bring a worthy upgrade to webmail. Some of the improvements in the last year include:

• Gmail-like labeling (categories)
• Outlook-like flags
• Banning common passwords
• Hacking alert system
• Outlook-like calendar view
• 10x speed improvements
• Outlook-like keyboard shortcuts
• Outlook connector improvements
• Internet Explorer 9 desktop notifications for Hotmail
• Hotmail Active Views
• Facebook chat in Hotmail
• Hotmail anti-spam Aliases
• Use any email address with Hotmail

Microsoft claims “now is the time to take another look at Hotmail.” The company has created its own mini-site to detail the new changes and convince users they should ditch rivals and come back to Hotmail. Is it too too late? Are you a Gmail user? Let us know in the comments.