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Microsoft announced at the Professional Developers Conference Tuesday that it is finally putting Office apps Word, Excel, and PowerPoint online, but not killing the traditional versions. It's about time Microsoft got with the program here. Online apps offer several advantages over software apps, which Google has been leveraging in its Google Docs suite. Primarily, documents that are created in an online app can be opened up for sharing and collaboration very simply.

If Microsoft Office were not a nearly ubiquitous piece of software, chances are the company would have added an online version earlier, due to another bit benefit of the platform: Your user base grows virally. All it takes is for a user to share a document and the app comes along with it, for free. With paid and installed software, obviously, there's a big barrier to adoption.

All is not peaches and cream with online apps, though. As a rule, they have less robust feature sets and interfaces than installable apps. Although many see that as a benefit, it's an easy thing to market against. People new to a word processor may adopt and stick with a product like Google Docs, but anyone with a few years of usage history in Office is going to find it harder to make the move.

Even among online suite users, there is often a split in usage behavior: People will use an app like Word to compose most or some of their documents, and then import them into Google Docs if they need to share them. Or they'll use Google Docs for some types of composing (documents destined for the Web) but not others (mail merge letters or documents being created for print). And this is where Microsoft has the upper hand. If (big if) the company manages to build online versions of its Office apps that complement its installed apps, it can obviate the problems with the split-use model, gracefully letting users float between versions of the apps as they want or need. In a demo at the PDC, Microsoft showed, among other things, two users working on a single OneNote 14 notebook. One was on a desktop app, the other on a browser. The changes on one were syncing over to the other. This is how apps should work: users should not care if they are online or off.

Microsoft, though, does not have a track record of building strong online/offline apps. The Web version of Outlook, Outlook Web Access, is a pale and poor cousin of the desktop app. And Microsoft has already said that the new online apps will not have all the features of the desktop apps.

As far as pricing, Microsoft will be competing with Google's free Google Docs as well as Zoho's suite. Microsoft cannot afford to give away its core productivity app completely. The company has not revealed its entire pricing strategy, although representatives note that the current Office Live has both free, ad-supported options as well as subscription services.

Although Microsoft will be late to the game in offering an online app suite when Office Online beta shows up in 2009, I do not believe it is too late. Google and Zoho have softened up the market for online apps but there are still plenty of people locked into Microsoft Office. This new direction brings Microsoft into an emerging market, which will then see a very big uptick in competition. This is going to be very cool to watch, and beneficial for users.

LOS ANGELES--Analysts and enthusiasts offered largely positive reaction to Microsoft's announcement of Windows Azure on Monday, impressed at the scale of Microsoft's bet on the cloud.

"I think it is very ambitious, extremely ambitious," said Gartner analyst David Smith. He noted that Microsoft is trying to span a broad range of audiences, from enterprise to consumer, and a broad range of devices.

That very ambition also means that it will take a while before Azure is ready for prime time, Smith said. Still, he was impressed at Microsoft's overall approach. "I think it's a very visionary, pragmatic idea."

In announcing Windows Azure, Microsoft said it was releasing a community technology preview of the effort. Developers can build applications and host them on Microsoft's servers for free, though the company will start charging once it has nailed down the features and made sure everything is ready for business applications.

A common set of tools can be used for developing applications for traditional Windows as well as for Windows Azure, according to Microsoft.

The economic downturn could serve to drive adoption within companies looking to cut costs, said Robert McLaws, chief blogger at Windows-now.com.

"Why pay for your own data center and staff when you can move it to Microsoft? Let Microsoft do the investment for you," he said. "It provides an interesting opportunity for start ups who are looking to build apps efficiently and to test ideas."

For Microsoft, Windows Azure is nothing less than a make-or-break move, said Jonathan Yarmis, vice president for disruptive technologies at AMR Research.

"I think they've said we have no choice but to succeed at this. To leave it to Google or Amazon or others to define the pace and characteristics of the platform would be very bad for Microsoft's long-term and even near-term prospects," he said. Microsoft's thinking would have to be: "We have to do this or we cease to be interesting as a company."

Microsoft faces a well-established Amazon hosted services market and a popular development platforms for the iPhone and Google apps.

"The start-up guys love what Amazon's doing. They don't need millions of dollars to buy infrastructure. Now you click a button to provision some servers and bang, you've got a solution," Yarmis said. "Amazon has offered the developers a really easy way to quickly deploy potentially massive-scale applications."

Microsoft is being purposely vague on the schedule for the services so as to attract and retain developer support, he said.

If Microsoft were to lose the developer community to a platform that's not in its control, that would mark a long slide into irrelevance, so they've got to win the developers,Yarmis said.

"Let's not underestimate what they're trying to do here...perhaps the most complex programming undertaking ever conceived. Given their track record, (do) we have to at least say is there a scenario where they crash and burn here? Yeah there is," he said. "But if they can deliver in reasonable time frames, can anyone touch them?"

Ina Fried of CNET News contributed to this report.

LOS ANGELES--Microsoft on Monday announced a version of Windows that runs over the Internet from inside Microsoft's own data centers.

Dubbed Windows Azure, it's less a replacement for the operating system that runs on one's own PC than it is an alternative for developers, intended to let them write programs that live inside Microsoft's data centers as opposed to on the servers of a given business.

"It's a transformation of our software and a transformation of our strategy," said Ray Ozzie, a computing industry pioneer who now serves as Microsoft's chief software architect. (For a play-by-play account of Ozzie's speech, see "PDC 2008: Windows Azure live blog.")

Ray Ozzie delivers his keynote address at Microsoft's Professional Developers Conference.

(Credit: Robert Vamosi/CNET News)

Microsoft first outlined a shift to "Live Services" at an event in San Francisco in 2005. The company has released a few things piecemeal, such as Live Mesh, but Monday's announcement marked the first real discussion of how Microsoft's disparate Internet strategies fit together.

The announcements come at the start of Microsoft's Professional Developer Conference here. On Tuesday, Microsoft plans to go into more detail on Windows 7, the successor to Windows Vista, due out by about January 2010.

With the launch of Azure, Microsoft will find itself in competition with other providers of Internet storage and computing services including Amazon, Salesforce.com, and Rackspace.

Ozzie said he was tipping his cap to Amazon founder Jeff Bezos for innovating the hosted computing model. Amazon "established a base-level design pattern, architecture models, and business models that we'll all learn from," he said.

Microsoft is making Windows Azure in preview form to developers, with a limited subset of the features that it plans to have in the product before its final release.

There weren't many details on how Microsoft will charge for Azure, saying it will be free during the preview period. Final pricing, Ozzie said, "will be competitive with the marketplace."

The company itself plans to offer businesses the option of running over the Internet the kinds of software that have traditionally run on a company's own servers. Microsoft already sells its Exchange corporate e-mail software in this way, but that is just the beginning, said Microsoft vice president Dave Thompson.

"All our enterprise software will be delivered as an online service as an option," Thompson said.

CNET News' Elinor Mills contributed to this report.

Server and Tools senior VP Bob Muglia talks about the benefits to businesses of Windows Azure.

(Credit: Robert Vamosi/CNET News)

Microsoft's cloud computing team discusses how a common set of tools can be used for developing applications for traditional Windows as well as for Windows Azure.

(Credit: Robert Vamosi/CNET News)

Microsoft's Dave Thompson tells attendees at the Professional Developer Conference that all of the company's enterprise software will be offered as an online service over time.

(Credit: Robert Vamosi/CNET News)

One of the biggest challenges in business software, whether it lives inside a company or is part of a hosted service, is making sure that only properly authorized employees have access to the data and applications. Microsoft discusses how its Federated Identity platform will work with the new hosted services.

(Credit: Robert Vamosi/CNET News)