Microsoft makes big push into online services

SAN FRANCISCO — Microsoft Corp. on Tuesday announced online enhancements to its Windows operating system and other popular software programs, hoping to defuse a growing threat from Google Inc. and other fast-moving challengers.

With a new Web site called "Windows Live," Microsoft hopes to create a new platform that will unfasten some of its applications from a computer hard drive.

The change reflects Microsoft's recognition of the growing demand for applications and services that can be used from any place, at any time, as the lines between the home and office blur and portable computing devices become more powerful.

"It's a revolution in how we think about software," Microsoft Chairman Bill Gates told reporters and industry analysts Tuesday. "This is a big change for...every part of the ecosystem."

It's Microsoft's most aggressive push yet into online services, an area that's being pioneered by search engine Google, portal leader Yahoo, Inc., and others.

Earlier this month, Google and Sun Microsystems Inc. said they would work together on online services, including office productivity software. Neither company, however, would discuss any details beyond a vague collaboration deal. Microsoft was slightly more clear in its announcement.

Gates said neither Windows Live nor another service called Windows Office would replace the operating system or other popular applications, such as word processing and spreadsheets, sold on disks that are installed on individual hard drives. Office Live, Microsoft said, will be targeted at the 28 million small business worldwide.

It will have elements that enhance regular Office applications while others will work independently of the software suite. Some of the tools outlined Tuesday will help small businesses build an online presence as well as offer applications to automate tasks such as project management, expense reports and billing, among others.

"With Office Live services, we make complex technology affordable and easy to use for small businesses, empowering them to reach their business goals," said Rajesh Jha, general manager of Information Worker Services at Microsoft. Office Live will be available as an invitation-only beta in early 2006.

In many cases, Windows Live — available at Live.com — will offer souped-up versions of services like online mapping and instant messaging that have long been available on Microsoft's MSN.com, a heavily trafficked site that will continue to operate. Microsoft also plans to continue to operate MSN.com, a heavily trafficked Web site that inspired many of the features included in the Windows Live Web site.

Windows Live will be offered for free and try to make money from the rapidly expanding online advertising market that has been fueling the explosive growth of Google and Yahoo, providing them with the financial and intellectual firepower to challenge the world's largest software maker.

Microsoft also plans to charge monthly fees for some of the Live Office features aimed primarily at small businesses — a subscription model that has been a boon so far for online software pioneers like Salesforce.com Inc., NetSuite Inc. and RightNow Technologies Inc.