(FORTUNE Magazine) – Mitch Kapor likes tilting at windmills. Now he has decided to tilt at one of the biggest windmills around: Microsoft. And the rest of us are either secretly or openly cheering him on.

Kapor is wealthy. He co-founded Lotus Development Corp., which IBM bought in 1995 for more than $3 billion. Since then he's been a shrewd angel investor--helping fund UUNet, Real Networks, and other very successful startups. He's also a committed activist and founder of the Electronic Frontier Foundation, a group that promotes civil liberties in electronic communications.

Now Kapor is putting together his wealth and his conscience to try to compete with Microsoft in a novel way. Let others challenge Gates & Co. in browsers or word processing. He wants to take on Microsoft Outlook and Microsoft Exchange, the program and server product, respectively, that a large percentage of corporations use to bring their users e-mail access, calendars, contacts, and a variety of other personal data. Most other corporations use Lotus Notes, which was originally designed when Kapor was still running that company.

Outlook and Exchange are a huge business for Microsoft. Together they account for more than $500 million in annual revenue--not as big as Windows or Office but an important tool for Microsoft to use in reaching end users and IT managers. And in fact end users do spend quite a bit of time with the programs, though not out of choice. Simply put, Outlook is one of the most frustrating, random programs I've ever used. It's bloated with hundreds if not thousands of features that have been added during its ten-year development history. Tech departments and home PCers have to invest countless hours making sure that the products will work for them. Despite that, Microsoft has been very slow to upgrade Outlook and make it more usable and modern.

Why? One could say that Microsoft, with only one real competitor in this market, hasn't felt much pressure to upgrade. And that's where Kapor comes in. No venture capitalist in his right mind would finance a startup to compete with Outlook. But Kapor has decided to help fund an effort to create a nonprofit "open source" project to devise a modern approach to managing personal data. Reportedly he's willing to put $5 million of his own money into the project. With his wealth, those millions won't make a difference in his lifestyle. But they will certainly go a long way to seed a new program that could outclass Outlook and Exchange.

The open-source approach allows people to contribute code to the creation of the new program, called Chandler, with one stipulation: They can't charge for their work. This method of harnessing programming talent has already led to the development of several significant software programs, including the Linux operating system, which is a competitive threat to Windows in the business world.

The open-source method--even given the existence of an individual who does not mind losing some of his personal wealth in the process--will still probably take years to deliver something useful and competitive. But the same would be true of a normal venture-backed company or even a project within a large company such as Oracle or Sun Microsystems. A typical company would take at least five years to deliver a usable alternative to Outlook and another five years to catch up with the application--about the same amount of time Microsoft took to develop the program in the first place. The need to earn a return makes that approach unlikely.

Personally, I think Kapor is getting a bargain. For $5 million he gets the satisfaction of knowing that he is motivating Microsoft to improve Outlook. He also can create something new while harnessing everything we've learned in the past 15 years about managing personal data. And he gets to try to integrate new technologies--handheld devices, wireless networks, software programming, and integration ideas--that have recently been developed. The outcome of creating a new approach to managing personal data could be very satisfying.

And if there's any chance that I might get a viable alternative to Outlook in my lifetime, I think Kapor is also providing a real and fundamental advance to society, reducing Outlook rage and improving productivity. That's definitely a windmill worth tilting at.

STEWART ALSOP is a partner with New Enterprise Associates, a venture capital firm. Except as noted, neither he nor his partnership has a financial interest in the companies mentioned. He can be reached at alsop_infotech@fortunemail.com. His column may be bookmarked online at www.fortune.com/technology/alsop.