Jay Greene provides an excellent perspective about Microsoft's recent foray into hosted model. Excerpts with edits and comments added:
With Web services clearly the next wave in computing, - don't count Microsoft out
They are famous for starting late and winning in the end. Microsoft recently announced a net strategy that is perhaps the most important Net strategy announcement since it launched the so-called browser war against Internet pioneer Netscape. Here Microsoft is creating two families of Web services, one for consumers, called Windows Live, and one for small businesses, called Office Live. Both are online counterparts to its Windows and Office software franchises, respectively. It also plans to make it easy for customers or independent software developers to build their own Web services that interact with MS technology. Unlike traditional programs, such as Microsoft's Office productivity suite, which reside on a PC, Web services run on Web sites and can be accessed via any browser. Gates sees the the Live era as just starting and projects it as a new way to look at software and a better way to create opportunities.
Its new services are based on widely accepted industry standards, rather than its own proprietary technologies. Microsoft has created a Web site, Live.com, where people can create personalized Web pages and gather many of the things they enjoy doing on the Web. In addition to headlines about their favorite sports teams and local weather, surfers can get e-mail, use instant messenger, and check out feeds from blogs and audio podcasts-it lets users post content from their own PCs, such as documents they've recently read, giving Live.com features that don't exist at popular services, such as My Yahoo. Most of Microsoft's offerings will be free, though some will require paid subscriptions. Office Live offers a similarly wide array of services - this time for small businesses. Microsoft will give away Web sites, software for designing them, and Web-based applications to manage businesses, such as collaboration programs. It hopes to pay for that basic level of service with ad sales. Users can subscribe to additional applications, such as project management or time and billing management for a fee. And the services link to Office programs such as Outlook so that users can work both online and off. Microsoft has had to maintain its Windows and Office empires, building ever more features into them to keep existing customers coming back for more. At the same time, new businesses emerged on the Web, threatening the relevance of those monopolies. As companies such as Google and Salesforce.com grew, Microsoft had to respond. Still, the new generation of Web services is designed to augment its traditional products, not supplant them.