Hi Lauren,
As always, it depends.
Outlook definitely is better when you already have an on-premise solution also is more advanced and smooth to use and organize tasks inside the organization. Unfortunately it is costly and hard to expand geographically. If you have it already installed, I would suggest you to use it with 100% of it's power.
Gmail is much better on-line and has a lot of add-ons to built CRM around. Also basically it is free and very mobile. Good one to jump-in your first CRM project.

M Scott Schaffernoth

Chief Tech Coach, Winnovative Technology Consulting, LLC

Posted on March 17, 2011

Nothing is "free".

As mentioned, either solution can offer benefits.

It's wise to think carefully about not only what you need to accomplish today but where you will be in 2 and 3 years.

What is easy to adopt today can be very painful to migrate away from later when it becomes too limiting.

Tom Rogers

Marketing Manager, Intellitec Solutions

Posted on March 18, 2011

I have to say Outlook. Gmail has it's advantages to be sure, but unless you are a very small operation, you are going to run into problems. If you are going integrate your CRM to your ERP system - even on a very small and basic level – you will find trouble with Gmail or Google Apps. We had a client that was going to use Google Apps for their e-mail. They needed to e-mail invoices to clients from their Microsoft Dynamics SL http://www.intellitecsolutions.com/productsservices/dynamics_sl/solomon.asp accounting software. Google told them they could not guarantee that functionality would work, and as such they could not support that. Again, all they needed to do was e-mail invoices to clients from inside their software! That is a pretty a basic function.

You also have to take into account that Google is effectively run by “robots”. If you are locked out of an account, you could be in very serious trouble trying to get back in.