Microsoft (Nasdaq: MSFT) today announced the most significant upgrade to its Office productivity suite in more than two decades. Office 365 will be a subscription-only service and launch as a limited beta in 13 countries today.

The new generation of Office is Microsoft’s most significant move into the cloud yet, as the company is targeting all those customers who have not been able to afford Microsoft Office from a purchase or support view in the past. Microsoft hopes that especially small businesses with one to five employees will adopt the new product.

The company promises the look and feel of the current version of Microsoft Office that will be supported by any browser that can run Active Sync, which includes all current popular browsers such as IE, Firefox, Safari, Chrome and Opera, as well as devices such as the iPad or iPhone. Microsoft responds to the general concern of security measures that are required for hosting critical and confidential documents in off-site datacenters by promising the dedication of "tens of thousands of engineers" that are ensuring that the data is "incredibly secure."

"It is far beyond what most customers could afford to do themselves," Microsoft said.

Microsoft will be offering small and medium-sized business the service for $6 per month, which will include its Office web apps, Exchange, Sharepoint, Lync and external services, which represent Internet/Intranet and Extranet services. Its Enterprise offering reaches from $2 per month for Email-access only to a $24 per month all-you-can-eat package that includes Office web apps, email, voicemail, voice- and videoconferencing, web portals, extranet, 24/7 phone support and enterprise social networking.

However, it seems to be clear that it is the SMB space Microsoft is interested in, and there is a clear revenue opportunity, if it can convince those small business to pay $72 per year for each employee for Office access via the Internet.

The move to Office 365 is a huge bet for Microsoft. Its Business division, which includes Office and Dynamics products, generates $18.6 billion in revenue annually and brings in $11.8 billion in operating income, which makes it larger, but less profitable than its Windows division ($18.5 billion revenue and $13.0 billion in profits). As the industry appears to have decided that cloud computing is the next big opportunity, Microsoft has its Office army in place to protect its largest and potentially most important business. It could be also the first time that Microsoft will be able to push its Online Service division into the black. Last year, the online business lost more than $2.3 billion.

The first version of Microsoft Office was introduced in 1989. Office 365 is scheduled to launch worldwide sometime in 2011.

Ctech

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