Microsoft's Head Is in the Clouds

In a long-overdue move, Microsoft (Nasdaq: MSFT  ) is ready for its cloud computing close-up.

The world's largest software company is announcing a Web-based version of its upcoming Office 2010 productivity software. It'll be limited in functionality -- but entirely free to use online.

No one can deny that Office apps like Word and Excel are industry standards. Cloud-computing initiatives like Google's (Nasdaq: GOOG  ) Apps and Adobe's (Nasdaq: ADBE  ) Buzzword are neat, but they're nothing more than bit players.

This doesn't mean that Microsoft's proactive push into the clouds is a surprise. If anything, it's inevitable. Making it free is a bigger shock, but it's also a humbling truth. If Web Office had come flavored exclusively as a premium subscription product, it would have opened the door for the free or cheap alternatives put out by Google, Zoho, and Sun Microsystems (Nasdaq: JAVA  ) .

Here is where the game gets interesting. Google turned heads last week  by announcing that it will enter the operating system market. Doesn't that blunt this morning's announcement from Microsoft? If the free Web Office is enough for most casual computer users, isn't this going to sting Microsoft's commercial version of Office 2010 as well as Windows 7? The operating systems will be less of a factor when it's all about connectivity.

Microsoft's Internet-based Office won't work only on Internet Explorer. Initially, it also will work with Firefox and Apple's (Nasdaq: AAPL  ) Safari. Google Chrome is a tactful no-show on the initial browser list, and that's both justified (given Chrome's measly share of the market) and tactical. Now that Google has proven to be the true enemy -- and not Apple -- Microsoft needs to cut off Google wherever it can.

In the end, Microsoft has to balance the need to make the Web-based productivity package accessible to as many people as possible, but also in a way that encourages them to own the commercial version.

It's a delicate balance, and also a grim reminder that Microsoft may never be the revenue-generating giant it used to be.

The world according to Microsoft:

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Longtime Fool contributor Rick Munarriz isn't convinced that the ninth cloud is any more special than the first eight. He does not own shares in any of the stocks in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On July 13, 2009, at 4:47 PM, dastaub22 wrote:

    "a grim reminder that Microsoft may never be the revenue-generating giant it used to be"

    If there's no revenue for MSFT in the cloud than there's no revenue for anyone; this is where your imagination fails you. Whatever is coming, no one sees it. I'm sure some people are guessing correctly, but they'll probably be a one-hit wonder.

  • Report this Comment On July 13, 2009, at 6:33 PM, TMFBreakerRick wrote:

    dastaub, there will be SOME revenue, of course. However, it's getting hard to fathom Office as a $15-$17 billion a year business the way it has for Microsoft in the past.

    Just as Windows 7 is hitting the market at a lower price point than Vista, there will be new revenue streams to make up SOME of the difference, but not all and then some.

  • Report this Comment On July 14, 2009, at 3:50 AM, memoandstitch wrote:

    Google is trying to get into every market. It doesn't matter how many market it fails, it just needs one (more than search) to work.

  • Report this Comment On July 14, 2009, at 7:33 AM, Luwingo wrote:

    Given that Chrome is actually based on Firefox anyway, wouldn't that allow Web-Office to work with Chrome?

  • Report this Comment On July 14, 2009, at 11:27 AM, asm1679 wrote:

    Google is doing a good job as a competitor. Good for the consumers.

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