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Microsoft has begun testing some Web-based Office applications that will be delivered through Office Live Workspace, its online adjunct to Microsoft Office, and give the company a closer rival to online application suites such as Google Docs. Microsoft will begin a public beta test of what it calls the "Office Web applications" later this year. They will allow users to create and edit new documents online from within a Web browser, said Justin Hutchinson, group product manager for Microsoft's Office Client division, in an interview at the Consumer Electronics Show in Las Vegas. That's a significant change from the capabilities in the beta of Live Workspace available today, which requires users to create documents using a copy of Office on their PC and then save them to the Web, where they can then be shared with friends and colleagues. Launched last March, Live Workspace marked the first tentative steps by Microsoft to put its lucrative Office franchise on the Web. More than 1.5 million people have signed up for the beta since it was released, said Michael Schultz, director of product management and marketing for Office Live Small Business. Its capabilities are quite limited, however. Users must create new documents in the desktop versions of Word, PowerPoint, and Excel, and then save them to the Web, where they are stored on Microsoft servers. Others can view the documents online, but editing them requires downloading them to a PC and opening them in Office. That contrasts with online suites such as Google Docs and Zoho, where the entire process of creating, saving and editing documents is done from inside a browser. But Microsoft has been testing a "technical preview" of the Office Web applications, which will allow users to create new documents online without needing to have Office on their PC. The Web applications -- Word, PowerPoint, Excel, and OneNote -- include a task ribbon similar to that in Office that lets people do "light editing" from inside their browser, including formatting text and tables. Microsoft plans to roll out a beta of the Web applications to Live Workspace testers later this year, though it won't say exactly when or how many people will be allowed to test them. Nor would it say how many are testing the technical preview that came out a few months ago, but it is likely to be a small number. Neither Schultz nor Hutchinson described the Office Web applications as a rival to Google Docs, and Microsoft positions its online tools differently. While Google sees online applications as a way to free users from the desktop entirely, Microsoft sees them as a complement to Office in its "software plus services" model. It will recommend using the Web applications in conjunction with Office on the desktop, as a way for people to share documents without having to e-mail them back and forth, and to access documents when they are away from their PC -- on a mobile phone, for example. For serious, heavy editing tasks, it believes people will still want the client version of Office. "With Workspace we're focused on that lightweight editing," Hutchinson said. "You can do text, formatting, and move things around, but when you get into rich graphics editing, much longer documents or writing a letter to the CEO, you'll probably want to be on the PC." Nevertheless, users will not be required to have a client Office license to create documents using the Web applications, Schultz said, and the service will continue to be free for consumers, supported by advertising. Forrester analyst Sheri McLeish said it's not surprising that Microsoft would offer document creation and editing through Live Workspace, since Google and others have challenged it with basic, more cost-effective productivity applications. "You have a lot of alternatives that are SaaS [Software as a Service] or lightweight versions [of Office], and [Microsoft] doesn't have many ways they can compete with those offerings," she said. The alternatives appeal particularly to smaller businesses, where Microsoft "is not competing very well on a cost basis," McLeish said.

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