Its late move into the market however, has left analysts sceptical as to how the offering will compete against those of long-time collaboration players such as IBM.
Office Live Communications Server 2003 - codenamed Greenwich and previously known as Real Time Communications Server - was released to manufacturing last week. Microsoft sees the product's delivery, slated for six to eight weeks' time, as a "key moment" in establishing IM as a business tool, said Ed Simnett, lead product manager at Microsoft.
With Live Communications Server, companies will be able to run their own enterprise IM network, address security concerns related to public services, and log and manage employees' IM usage. The product is capable of determining whether a user is online and available for communication in Office applications and can extend this "presence" information to other applications such as custom portals.
Despite noting the significance of the product's upcoming release, analysts believe Microsoft has some catching up to do. Market incumbent IBM has been selling Lotus Sametime - recently renamed Lotus Instant Messaging and Conferencing - for approximately five years.
"Sametime has been out for a number of years, giving IBM a significant leg up. I would expect to see the second version of Office Live Communications Server as a closer competitor to Sametime," said Michael Osterman, president and founder of Osterman Research.
But with Office on nearly every business user's PC, Microsoft has a considerable market advantage, said Maurene Caplan Grey, research director at Gartner.
"What Live Communications Server has that nobody else has ... is integration with Office and SharePoint," Caplan Grey said. SharePoint is Microsoft's file-sharing and team-collaboration product.
Providing IM in context is one of Microsoft's goals. Until now, Microsoft has struggled in finding a home for its IM product, placing it first in Exchange and then toying with making it part of Windows. The company finally settled on Office as the right place.
"The Exchange IM product was not really ready for prime time. Live Communications Server is a much more fully baked idea and part of a long-term road map for their collaboration products," said Robert Mahowald, research manager at analyst firm IDC.
Still, IBM's product has "four distinct advantages" over Microsoft's, according to Mahowald. Sametime has a lower overall price, includes web conferencing, has no need for an additional server, and offers modular configuration.
Francis deSouza, formerly Exchange IM product manager at Microsoft and now chief executive officer of IMlogic, which sells software that overlays security and auditing tools on public IM systems, said Microsoft has had been through a learning process.
"We initially thought IM was complementary to e-mail. But Microsoft learned that IM and presence is tied more to Office. A lot of usage scenarios involve Office," deSouza said.
Even though enterprise IM products have been out for a number of years, businesses tend to use free consumer-IM products, according to Osterman. Others have shied away from IM, blocking it at the firewall.
Some of these firms may use the Microsoft launch to review their use of IM, analysts said.
Office Live Communications Server will have a large potential user base. Exchange 2000 IM users who bought upgrade rights will get the product at no extra charge. Loyal Microsoft customers who already use Active Directory, SQL Server, and Windows Server 2003 and those who plan to use Office 2003 are most likely take the bait, analysts said.
Microsoft may be the sparkplug for enterprise IM adoption, according to analysts.
"Organisations that are fully engaged in the Microsoft environment have been waiting for Microsoft to get into the IM and collaboration game," Gartner's Caplan Grey said.
IDC's Mahowald agreed but pointed out that only somewhat cutting-edge enterprises will be able to adopt it at first.
"Office Live Communications Server is definitely not for everybody. You have to do some fairly significant upgrades in order to use this thing out of the gate," Mahowald said.
Joris Evers writes for IDG News Service
This was first published in August 2003