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Hosted Exchange does not work with GP13

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I have a Windows Server 2012, GP 13, and Microsoft Outlook 13 (32bit). When I try the email setup, the exchange log on screen reappears as if i typed the incorrect username and password. I've also notice to long black bars will appear in the bottom left hand corner of the login screen.. I've performed this setup before on our development machine with no problems.  The only difference between the machine with the problem and the development machine that works, is that exchange is hosted on the machine that's not working?  

In order for the email function to work in GP13, does the exchange server need to be local or can it be hosted?


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