Microsoft aims to offer IT directors a hosting option to lower the cost of running Microsoft server products and give end-users online access to Office documents - something that is already available on Google's Apps platform.
The company's strategy is to provide online services to complement its existing software products, starting with Office Live Workspace, a collaborative workplace, and Microsoft Online, a hosting service. The hosted service covers three Microsoft server products.
Industry experts are reporting demand among businesses for end-users to be able to share documents over the internet in a controlled manner.
Dale Vile, managing director of analyst firm Freeform Dynamics, said, "We are seeing a growing need for collaboration among businesses, particularly among small and mid-sized companies."
Microsoft is the latest company to provide this type of functionality. The Live Workspace product provides a way for end-users in businesses to collaborate more easily on shared documents, compared with e-mail-based collaboration.
Richard Edwards, senior analyst at Butler Group, said 60% of users use e-mail for collaboration, which potentially results in confusion since users may see multiple versions of the same document.
IT directors may question where these products fit into Microsoft's strategy, given that there are already many ways to share documents, such as using Microsoft's Sharepoint product or giving users virtual private network access.
Darren Strange, senior product manager at Microsoft, said, "Live Workspace is designed for personal use. People will use it in business to share their personal documents."
Microsoft plans to offer enterprise users three approaches to running its software:
● The traditional implementation where the business installs and manages the software
● Via services hosted by Microsoft partners
● Through Online Services, where hosting is run in Microsoft's own datacentres.
Strange said the company had no plans yet to provide online versions of its Microsoft Office applications.
Rise of online applications
Online applications is a growing area. Last month saw the addition of Google Presentations to Google Apps, enabling Google to offer business users a word processor, spreadsheet and presentation application. The presentations product allows users to collaborate on creating presentation slides, and it can be used to share a presentation with several users.
Adobe has also been developing online applications. It is planning to buy Virtual Ubiquity, the start-up that developed the Buzzword online word processor. Significantly, Buzzword uses Adobe Flash, which means it is able to combine the full graphical user interface of a product suite such as MS Office with the online collaboration features of Google Apps.
Adobe plans to invest in Buzzword, integrating the application with Adobe's existing online document collaboration services. These include Create Adobe PDF Online for creating PDF files, and Adobe Document Center, which helps users retain control of documents and track their usage.
David Bradshaw, principal analyst at Ovum, said, "With Adobe and Google, there are now two serious online rivals to Microsoft Office."
As a result, Microsoft may be pressured into reducing the cost of licensing MS Office, or even splitting the product to make it cost-effective for businesses to purchase the individual components.
Bradshaw said Adobe's Buzzword acquisition would provide a richer user interface, unlike the simpler browser-based graphical user interface on Google Apps.
New breed of software
Applications such as Buzzword represent a new breed of software that merge browser-based computing with traditional PC software. The benefit is that users do not need to be online to run the software or access files, but documents can be made available and shared over the internet.
Bradshaw said he expected Google to offer such capabilities in its Apps online suite using a technology called Gear, which is based on Ajax, a programming interface used to build interactive websites.
Microsoft and Google may seem very different in terms of their approaches to online services, but they have a common goal to attract users who want access to documents from the web.
Bob Tarzey, service director, at analyst firm Quocirca, said, "Both Microsoft and Google are developing a portfolio of online tools." Where they differ is that Microsoft's approach relies on MS Office being installed on desktop PCs, while Google relies on browser-based access to online documents.
Some businesses may be concerned that their data resides in a Microsoft or Google datacentre. For such users, Microsoft will continue to sell the standard Microsoft Office package, which is its second biggest revenue stream, after Windows.
Tarzey said Google could offer an appliance server, rather like its Enterprise Search appliance, allowing users to install a physical box on-premise which could then run Google Apps and store all user documents. With such an appliance, Tarzey said Google could offer users a truly viable alternative to Microsoft Office.