"The cloud is a big theme in this release. We see Microsoft's cloud strategy [for Office] evolving and taking another big step," Webster said.
However, the Office software is still installed on the user devices, unlike, for example, Google Apps, whose applications reside on Google servers and are accessed by users via a Web browser.
The conundrum for Microsoft is that there's a limit to the functionality that vendors can provide in applications that are fully hosted in the cloud. That's the case with Office Web Apps, for instance, the hosted version of Office that contains a subset of the full functionality.
"To run the full, high-octane versions of the applications, you need them installed on the user's machine," Webster said.
For example, Office 365 Home Premium -- the subscription option for families and individuals -- will still require users to install full-featured versions of the Office applications on each machine. Documents can be stored online, however, and the product comes with 20G bytes of SkyDrive storage.
Eventually, browser-based applications will reach a level of functionality that's on par with locally installed applications, said Rob Koplowitz, a Forrester Research analyst.
That future is closer in certain types of applications, like Web-based email, but further in others, like spreadsheets, he said.
"For the time being, Microsoft is leveraging the cloud in a clever way to bring the best of both worlds together," he said.
Although the beta launch was focused on the consumer market, Microsoft also addressed the SMB and enterprise markets by stressing that the upgrade effort extends to the collaboration and communication server products like Exchange, Lync, Yammer and SharePoint, and by announcing new Office 365 subscription options for workplace use.
By tying together all these different products, Microsoft is making an aggressive move to try to wipe out the many startups that have sprung up in recent years to provide point solutions for enterprise collaboration, cloud file storage, and sharing and productivity applications, Koplowitz said.
"Microsoft is following a strategy of bundling and integrating products, making them work well together really well, and pushing down competitors' products to the level of features, so it can own the knowledge worker experience from end to end," he said.
Microsoft is also stressing the point that Office is available across a variety of Windows 7 and Windows 8 devices, including desktop PCs, laptops, tablets and smartphones. It will also be available for Mac OS desktops and laptops.
However, a gaping hole in this strategy is Microsoft's silence and apparent reticence to create versions of Office for non-Windows tablets and smartphones, in particular iOS and Android devices.
Both at home and at work, people are using a variety of devices -- Windows and Mac OS desktops and laptops, iPads, iPhones, Android smartphones and so on -- and expect applications and data to be available across them.
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