Microsoft to Deliver Hosted Windows, Office

SAN FRANCISCO — Microsoft announced Windows Live and Office Live, advertising-supported, online versions of its market-dominant operating system and desktop productivity software.

While industry watchers waited to see what would come from the recently announced alliance of Google and Sun Microsystems , Microsoft unveiled Web-based versions of its own productivity applications. They include free, ad-supported services for both consumers and small businesses.

At a briefing for press and analysts, Microsoft Chairman Bill Gates said that every five years, the company lays down its chips on what it hopes will become the next big thing. In 2000, it was the .NET Framework and Web services. Today, it’s a new concept Microsoft is calling “live software.”

Windows Live will include Windows Live Mail, an e-mail application based on asynchronous JavaScript and XML (AJAX), the programming architecture used in Google’s Gmail and Yahoo’s revamped offering.

Windows Live Messenger is new product based on MSN Messenger that unifies all contacts. For this functionality, Microsoft drew on the store of contact information that underlies the MSN Messenger service.

Windows Live Mail and Live Messenger will be available in beta on Tuesday, along with Windows Live Safety Center, an online scan for problems such as spyware on a PC. Over time, Microsoft will migrate all MSN Messenger and Hotmail customers to Windows Live.

Office Live, built on Windows SharePoint technologies, is targeted primarily at small businesses with less than 10 employees. “Think of this as hosted SharePoint,” Gates said. Office Live means someone who doesn’t want to run their own server gets all those SharePoint innovations.”

Sponsors will bid for placement of their ads on the Office Live interface, said Rajesh Jha, a Microsoft general manager. The service will be available in beta in the first quarter of 2006. In addition to the free, ad-supported offering, a subscription-based offering, also for small businesses, will include collaboration services such as the ability to create multiple, secure, shared sites with unique permissions and access.

A subscription service will let them manage their businesses online, with 22 business applications and collaboration tools. Partners are invited to enhance Office Live with their own software extensions, such as CRM and accounting software.

Businesses will get a free, hosted Web site, along with tools to design it and up to 10 e-mail accounts. The company Web site maintains the company domain name and URL, as do e-mail accounts, which come with 2 gigabytes of storage each.

Mojo is a new collaboration tool that will be included free; it lets users view and interact with desktop documents in real time. The document remains on the creator’s desktop, not on a Microsoft server.

Executives have been dropping strong hints about this direction ever since the Microsoft Financial Analysts meeting, when CEO Steve Ballmer said, “We’re moving from a world where we deliver bits to one, to where we deliver bits and services across the Internet.”

In fact, Microsoft quietly instituted this approach following a 1999 meeting, Gates said. For example, the Watson function of Windows XP sends information on crashes and software problems back to Microsoft, where it’s shared with its entire partner ecosystem. XP Service Pack 2, which tightened up security for the operating system, was delivered via a download, while the help function of Microsoft Office automatically connects the user with online templates and help text that’s updated regularly.

“With MSN, everything we’d done there is the live paradigm,” Gates said. The messenger software is automatically updated on a regular basis, so users get feature improvements every four months or so.

Xbox 360 will pay off on the bet Microsoft made about connecting the game console to the Xbox Live service via broadband. “We made that bet, at the time a risky one. Today, we have over 2 million connected to Xbox Live. This was an eye-opener for us.” The next generation, Xbox 360, launching November 22, will “take live to the next level,” Gates said.

Jeff Henshaw, an executive producer in the Xbox group, demonstrated the Xbox 360 Guide, which gives one-button access to community and communication features including scores, chats, e-mails, pictures and forums. The Xbox 360 Dashboard will encourage users to spend time between games by accessing an online marketplace for game and digital content including music.

The live software scenario extends to enterprise software as well, Gates said. Microsoft Managed Services is in pilot tests with customers now, while the Frontbridge acquisition will lead to managed e-mail services.

Demonstrations of the new Live services at the press event frequently crashed or were unavailable, pointing up one weak point of Microsoft’s new direction: It assumes ubiquitous broadband connectivity.