This one is tougher to explain. GMail is nothing but loved by everyone who uses it. It is fast, simple, innovative, spam-free and costs nothing for up to 10 users and very little beyond 10 users. It has mobile clients which can use multiple protocols like POP, IMAP and even Exchange (thereby enabling push contacts, email and calendar).
Good alternatives do exist, though. Not just for being not Googlebut also because they offer compelling benefits.
Yahoo! Mail has unlimited storage, connection with social networks, pretty good search (including searching for attached photos and documents) and an excellent web app. However it fails miserably when it comes to non-web clients. It does not offer free POP/IMAP and in fact, does not offer Exchange Active Sync at all. Yes, they are somewhat of a first class citizen on the key mobile platforms (via the use of custom IMAP) but on the desktop you are left to use some third party proxy type of applications or pay for Yahoo! Mail Plus. If you don’t mind the small yearly charge for the flexibility, it is a viable competitor although it offers very little in terms of inbox management (not just spam filtering, but also bulk mail management).
Hotmail on the other hand, has made tremendous improvements to catch up with GMail. The original, and still the most used, web email provider was relegated to the bottom of the pile after it earned the reputation of being spam-filled, slow and of limited functionality especially compared to GMail. Recently they have implemented several updates like the ability to Sweep messages to file away bulk email like newsletters, availability of sub folders, Office Web Apps (Word, Excel, PowerPoint on the web), photo integration with email, email aliases to avoid being spammed and most importantly, having almost no spam in the inbox anymore. In addition, they have implemented Exchange Active Sync for mobile access, and have made their Calendar and Contacts tightly integrated with the email app. Combine these updates with the ability to sign up with a custom domain and unlimited storage mailbox at no cost, makes Hotmail a serious contender if you are looking to move away from GMail.
Finally, the service I ended up choosing, is Office 365. This service is the new version of hosted productivity and collaboration applications from Microsoft. Before Office 365, Microsoft required a minimum of 5 users to sign up for such a service, but with Office 365, they are allowing even a single user to sign up. It is not free, but at $6/user/year and a 25GB mailbox, I am ok paying the charge because not only do I get SharePoint and Lync in addition to email, calendar and contacts via Exchange, but also, Microsoft has a financially backed 99.9% uptime guarantee. Since the service is Exchange, I get all the benefits of the control and flexibility like enforcement of various policies, which was until now limited to corporate IT departments of large enterprises. Mobile is also a no-brainer in this case since Exchange Active Sync naturally is included. Office 365 is a compelling alternative to GMail, and a no-brainer if you are already paying for GMail business edition.
I am currently in the free period of the Office 365 beta and I absolutely love it. However, I am seriously also considering going to Hotmail with custom domains, which can also be a good alternative. The reason being, it gives me a free and simpler alternative to GMail, without taking any major functionality away. If I see no use for SharePoint and/or Lync with Office 365, I may start investigating Hotmail with custom domains a bit more.