Ars Technica has an article over the background behind Hotmail and how it aquired the stigma it has since its purchase back in 1997 for $450 million. Over the years it served as a showcase for several types of failure, including the inability of Windows servers to work in production or to scale.
(Score: 2) by coolgopher on Tuesday January 02 2018, @10:13PM
Hotmail still has that limit, which by extension means Outlook.com also does, and that cascades onto the entire Microsoft Account (formerly "Live ID") so if you're using any MS cloudy service thingy, you're stuck in the dark ages with 16 characters. At some point I read that it was for compatibility with the old (well, ancient) Lan Manager, but IIRC that actually only did 14 characters.
If you're using a local Windows account however, you can have a 127 character password to log in with. If you don't care about the logging in aspect, you can go as high as 255 characters (unicode). Why the blazes those two numbers aren't the same beats me. Lazy coding or failed inter-departmental communication is my suspicion.
There were a lot of blogs on the topic when the 16 character limit was brought into the open back in 2012 [thenextweb.com], and things haven't moved since [thewindowsclub.com]. Yay Microsoft...