After a lot of head scracthing and ms-office site research found the solution. Outlook looks up the configured address books for lookup function. If the personal contacts are listed, it will not be available for lookup.
Here is the procedure to add the personal contacts for lookup:
- Go to Tools --> Email Accounts.
- In the pop-up box Select the "Add a new directory or Address book" option.
- Click next and select the "Additional address book" option.
- Select the "Personal address book" option and click next.
- Click OK to finish the wizard.
Now when you compose a mail and use address look up you will have Outlook contacts available for look up.
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