Microsoft to offer Web-streamed Office

Worried by the small but growing number of small businesses and consumers switching from Microsoft Office to cheaper or free online alternatives such as Google Apps, Microsoft plans to arm a key cohort of its formidable legion of partners to help fight the threat to Office 2.0.

Microsoft plans to test a yearlong change to a key part of its license for Office 2007 that will, according to multiple sources, enable Web hosting service providers to offer Microsoft Office via an emerging technology called application streaming.

The sources said Microsoft will make the announcement early next week during its weeklong Microsoft Management Summit show in Las Vegas.

If successful, the company will likely overcome its long-held fears about hurting its hugely profitable Office business and make the change permanent.

Microsoft "has been sensitive to whether it would cannibalize its own application business," said Neil Gardner, a vice president of marketing at application-streaming software vendor Endeavors Technologies. "They were also sensitive to the piracy side of it, of losing control over distribution."

Such a change could mean that Microsoft, with the huge data centers it is building, will start to stream Office directly to its customers, too.

It will be the second announcement by Microsoft this month that showcases its determination to fight growing competition from Google Docs, Yahoo's Zimbra, Zoho Office, ThinkFree, and similar services.

Last week, Microsoft confirmed that it is beta-testing a low-end Office bundle, code-named Albany, that it will offer on a subscription basis.

Microsoft did not respond to a request for comment.

Talk is cheap; is the service?

News of the license change had already leaked out among members of Microsoft's hosting partner community, which had been campaigning for it for the past several years.

"What was frustrating for us was that Microsoft allowed Terminal Services for Office but explicitly disallowed application streaming," said Gardner, whose company is trumpeting the news on its Web site.

But others warned that Microsoft will have to price streaming Office low enough to make it competitive with the paid Enterprise version of Google Apps, which offers technical support for $50 per user per year, and competitive too with the free offerings.