On November 1, 2005, Microsoft previewed a coming generation of Internet-based services that will tie into the company's two dominant software families, Windows and Microsoft Office. Dubbed Windows Live and Office Live, respectively, these two sets of services are part of a new focus for the software giant that's been in the works since Ray Ozzie became the Chief Technology Officer (CTO). Windows Live and Office Live join Xbox Live, a preexisting service, in establishing Microsoft's push towards combining software with services.

For Windows Live, which I'll be looking at in a future preview, the company is essentially rebranding existing MSN services as Windows-based services. For example, MSN Messenger is being updated and renamed to Windows Live Messenger. The thought here, I suppose, is that the Windows brand is more respected and well known than the MSN brand, so it makes sense to tie those services to Windows instead. However, unlike the product bundling that got Microsoft into so much trouble a decade ago, the Windows Live services will not be included in any Windows version and will be totally optional. If consumers feel that the Windows Live services provide some sort of benefit, they can sign up at their discretion.

Office Live is another thing entirely. Unlike Windows Live, which is aimed squarely at consumers, Office Live is aimed at the business customers Microsoft targets with its Office productivity suite and related Office System products. In this preview, I'll examine what we know about Office Live, which is, at this time, still some weeks away from a private beta. In future articles, I'll describe my hands-on experiences with Office Live.

Office Live: Business Services for the Live Era

To understand how Office Live came about, let's step back a bit. Baris Cetinok, the Director of Product Management and Marketing for Office Live at Microsoft, told me during a recent briefing that the Office Live strategy started coming together in early 2005, in parallel with the development of Office 12, the upcoming version of Microsoft's office productivity suite. "Currently, I lead the product management and marketing team for a new division called Information Worker Services [IWS], which was founded in spring of this year" Cetinok told me. "It's a division that is part of the Microsoft Business Division, which is led by Jeff Raikes, who you probably know." IWS is tasked with creating the services strategy for the Microsoft Business Division.

Office Live, essentially, is the Office team's contribution to what Microsoft is calling the "Live Era." The Live Era is about bringing people, their data, applications, and devices together. "In that venture, we believe, the most important thing is to provide customers with a total and seamless experience," Cetinok told me. "It's not an either/or value proposition. It's not software vs. software as a service. We believe it's an interaction of the two, software plus services. But we believe that each of these components can be mutually exclusive of the other. Both should be valuable to the customer. Yet in a world where we have great local computing power, and a great likelihood of broadband connectivity, even in the homes, there are all these great experiences that we can now enable that were not possible before."

The nice thing about this model, aside from the healing effect it will have on Microsoft's soul, is that it doesn't require customers to rip and replace what they already have. Instead, customers can determine which Office assets they'd like to use, in both software and service form, and utilize only those things which are of value to them. Cetinok told me that the Live Era changes Microsoft's business model in two ways. First, with the services model, the company can change the way in which it delivers software to users. A single services upgrade instantly upgrades thousands of clients, with no client-side software installs or deployment hang-ups. Second, the Live Era enables a new hybrid business model, where services can generated income for Microsoft in a number of different ways, depending on the situation. "Some of the things we'll do will be advertiser supported, transaction fee supported, or subscription fee supported," Cetinok told me. "It's like TV. Many TV shows are advertiser-supported, but you're starting to see product placement in network TV shows, while many people pay $10-$15 each month to get the premium programming on channels like HBO. There will always be high premium services and products, and those might come with transaction fees or subscription costs, but there will also be services that we can bring to price sensitive segments with advertising."

The idea behind Office Live (and Windows Live) is, in some ways, clearly influenced by the success of Xbox Live, which has garnered over two million paying subscribers. That's pretty impressive for a service that, until very recently, was only geared toward a niche market of hard core gamers. "That's a great example of how services, devices, and software can all interact together, but as a consumer you just care about multiplayer gaming, not about each of those components works together to create a single experience," Cetinok said. "You could be playing against someone in the same room, or someone on the other side of the globe." For Office Live (and Windows Live), Microsoft is trying to take the same interactions and apply them towards different scenarios.

Core principles

From a fundamental perspective, Office Live encompasses a handful of simple principles. As noted previously, it is not about just software, and not just about services, but is rather about how they can interact together.

Too, up until the Live Era, some companies benefited from the interactions that can happen between client applications (such as the Microsoft Office products) and servers (like SharePoint Services). But many smaller businesses cannot afford server-based computing for a variety of reasons: The systems are too expensive, or so complex that they would require expertise that these companies do not possess. Because of this, many companies are simply missing out on the benefits of services they cannot use. But with Office Live, Microsoft can provide many of these benefits through centrally managed services that small businesses will simply consume, with no management overhead. "It's almost a democratization of that client-server paradigm, for the masses," Cetinok told me. "We can provide the same interaction, the same value, to very small businesses that might not be able to deploy server-based computing in their work locations.

Finally, the most important aspect of Office Live is the fidelity of data and information that is used via the service. For this reason, Microsoft will support a number of devices, multiple PCs, and multiple styles of clients. "It's up to the customer," Cetinok said. "Do you want to get to your data via a Web browser? Would you like to get to it via Excel? Do you want to take it offline? Or do you want to get to it through a .NET application? We believe it's all up to the customer."

To make this all possible, Microsoft is leveraging common communication methods such as Web services and bidirectional RSS feeds. And naturally, the company has a wide variety of software, including Office applications, P2P solutions like Groove and the recently acquired FolderShare service, and Internet services such as Windows Live. All of those components will be able to interact in different ways, creating an overall customer experience.

Understanding the first version of Office Live

There has been a bit of confusion about what Microsoft intends to offer via Office Live. The confusion, largely, concerns what the company will offer initially compared to its long-term vision of Internet-based business services. "Our initial services are aimed at the market which is currently most underserved by today's products and services," Cetinok told me. "We picked the target market very carefully, instead of going after markets that are already being addressed by Microsoft and others."

The initial version of Office Live targets small businesses in the United States with less than 10 employees. These companies will have broadband access, and have not invested in an onsite server. The service is optimized for businesses that exist in a single location and have no IT staff.

"Our goal is to address very pertinent pain points from which this group currently suffers," Cetinok said. "If a small business doesn't have an online presence now, they're invisible. So the first goal is to get them online. That's the basics." To this end, Microsoft will provide small businesses with a professional online presence, at no cost. Instead, this service will be advertising supported. "We will provide small businesses with a domain name, Web site, and company email accounts with their own domain name, for free," Cetinok said. "We believe that's the first step."

Let that sink in for a moment. Today, there are various solutions that offer a portion of these services--say, domain name acquisition and Web site hosting--but the fees are often extravagant. It's confusing for small businesses to figure out where to get the best deals of domain names, Web site hosting, and email hosting, and they often have to turn to different service providers to bring it all together. That can take a lot of time and effort.

But that's just the basics. Microsoft has far grander plans for Office Live, which Cetinok describes as an all-in-one solution for small businesses. The next step is overall business management. "We want to help them manage their businesses," Cetinok noted. To this end, Microsoft is offering over 20 business applications in five categories that will help customers automate daily business tasks.

Many Office Live services will come directly from investments Microsoft is making with Windows Live. "We're using the Windows Live email infrastructure and their instant messaging [IM] infrastructure," Cetinok said. "So all the innovation that happens over there, or through Office Live directly, will accrue immediately to Office Live customers." So when Office 12 comes along, and Windows SharePoint Services (WSS) is updated, then we'll upgrade our systems, and Office Live customers will immediately get the benefits of that newest platform version."

Finally, Microsoft is providing small businesses with collaboration solutions that will help workers in small businesses interact with both co-workers and others outside their company. What's interesting about the collaboration bit is that even many large enterprises don't do a great job of enabling collaboration solutions such as WSS. Because of the nature of the businesses, small businesses typically have more interaction with individuals outside of their companies (compared to enterprises, where many employees only interact with other internal employees behind a firewall). So Microsoft will enable ways in which small businesses can interact with clients, partners, and customers online, using Microsoft Office System products such as WSS. But since they are exposed as services, customers using Office Live won't have to deploy or manage WSS, but can just take advantage of their functionality remotely.

Using WSS in this fashion benefits just about everyone. From Microsoft's perspective, centrally managed WSS servers can be easily updated with new features and functionality. And Microsoft's partner ecosystem can take advantage of this approach by building their own services on top of Office Live. Customers who get Office Live can therefore deploy third party services on top of Microsoft's offering if that makes sense for them. No onsite servers need to be installed, and no IT staff needs to be hired.

In the short term, the extensible nature of Office Live means that customers will have to deal with Microsoft partners directly in order to access third party services. But in the long run, Cetinok says we can expect to see an Office Live marketplace where customers can easily discover third party solutions that run on top of Office Live.

The nitty gritty

So how does all this stuff work in the real world? Office Live customers will get a domain name (like yourcompany.com), 5 email accounts with 2 GB storage each that utilize the company's domain name (and not with a Hotmail.com, MSN.com, or whatever suffix), and a Web site with 30 MB of space and traffic analyzing capabilities. "That's the plan for the beta, but we'll review those numbers when we launch in fall 2006," Cetinok said.

Office Live will consist of a number of services, which can be split up into key categories, such as Web site, email, collaboration, and business applications. In the following sections, I'll examine these categories, based on an Office Live demonstration I received at Microsoft's Redmond campus last week. However, know too that there is a portal with member services through which Office Live customers access these various services. That portal, as you might expect, is based on WSS technologies and will be familiar looking to anyone that's used WSS.

Also, while some of these services will feature advertising, Microsoft isn't opening up Office Live to anyone who wants to plug products. Instead, the company will offer that opportunity only to partners that are targeting similar audiences. Also, Microsoft is encouraging advertisers to offer Office Live-specific or offer-based advertising only, so that users will actually find the ads to be useful.

OK, let's jump in.

Web site

Office Live will include an easy, browser-based Web design tool that is available from the Office Live portal, called the Member Center. "It's all in the browser, with no client-side code required whatsoever," Cetinok said, as he showed me around the interface. The tool offers a simple point-and-click interface with a plethora of stock photography, pre-made layouts, color schemes and site themes, and a WSS-type drag-and-drop Web designer tool. Users can also upload their own images, of course, and customers who opt for the top-tier Office Live version will be able to access the site via Microsoft FrontPage. Users who are familiar with WSS will be particularly at home with the Office Live Web design tool, which utilizes WSS technologies such as Web parts for more advanced functionality. It also includes a rich text editor, which lets you add your own styles, or import text with formatting from applications like Microsoft Word.

Additionally, Office Live supplies a set of services called Office Live Site Reports that lets customers analyze their site traffic. During the beta, Microsoft will not offer any sales and marketing or commerce services, but for the late 2006 launch, the company will launch portfolio services as well.

Email

The Office Live email experience is based on Windows Live Mail (previously codenamed Kahuna, see my preview), or at least it will be: Initial beta users will utilize a Hotmail interface while Kahuna is being completed. Once that happens, Office Live will switch over to Microsoft's more compelling, AJAX-based mail offering, which provides many of the features you'd expect to see only in true email clients but via a Web page.

In the Basics version of Office Live (see Timing and availability below for details), users will see small unobtrusive ads while using email. This is similar to the way Hotmail works today, but from the demo I received, the ads seemed less intrusive.

Top-tier Office Live customers that wish to access their Office Live email from a true email client can do so if they don't mind using Microsoft Outlook through the Office Outlook Live offering (see my review). Other Office Live customers will get access via the Web only. Honestly, it's not horrible, and businesses will be able to customize the email interface to feature company-specific graphics and logos.

Collaboration

To help small business employees collaborate with each other, or with users at other companies such as partners, clients, or customers, Office Live offers Web-based collaboration environments, based on WSS. Employees can invite others to collaborate with them via email, and then utilize key WSS features such as password protection, access rights, and document checkout.

Business applications

Office Live will include 5 groups of more than 20 Web-based business applications. These include solutions for such daily business tasks such as project management, sales and collateral management, customer management, expense reports, time and billing management, and secure internal and external collaboration, Microsoft says. "Many midmarket companies would kill to have someone come in and just provide this kind of functionality," Cetinok said. "Basically, these applications are just designed to help small business owners manage their business online." All of the information is Web accessible, with manageable employee roles ensuring that employees can access only that information that is relevant to their jobs.

Cetinok showed me a number of these applications, including one centered on customer management. It is a simple looking WSS-based application, but it offers rich functionality and can be customized by partners for company-specific needs. It's based on Business Contact Manager from the Small Business version of Microsoft Office, and supplies roaming, remote access to customer information.

Timing and availability

In the first quarter of 2006, Microsoft will provide select US-based customers with access to an invitation-only beta version of Office Live. You can apply for the beta at the Microsoft Web site, but you're going to want to move fast as Microsoft receives between 500 and 1000 requests each day.

Though the initial offering will be labeled a beta, Cetinok said that it would be production quality, from both code and functionality perspectives. The goal during the beta, which will last through the end of 2006, is to learn from customer experiences and upgrade those portions of the service that require it over time. When Microsoft flips the US version of Office Live to public availability at the end of 2006, the company will aggressively expand into other markets globally as well.

There will be three Office Live offerings. The first, called Microsoft Office Live Basics, includes the free (but advertiser-supported) Web site, domain name, and 5 email addresses. The second is called Microsoft Office Live Collaboration. It will be subscription fee based and is a solution for small businesses that already have a Web site and domain but want to take advantage of the Office Live business applications and the intranet/extranet experiences. The third and high-end offering is called Microsoft Office Live Essentials. This top-tier Office Live service includes the Web site, domain name and email addresses, but offers more storage and 50 email accounts, as well as the business applications and intranet/extranet offerings. Essentials customers can utilize the 50 email accounts in unique ways; for example, one might create aliases for sales, support or whatever and are automatically forwarded to specific people in the company.

During the beta, all of these services will be completely free of course. Final prices have yet to be announced, but Cetinok told me that Microsoft is already sending a message about its value-based pricing with the free Office Live Basics offering. "We're very cognizant of how price-conscious the target audience is," he said. "We're not going offer extreme premium-based pricing." Microsoft will announce its pricing plans for Office Live in very early 2006, he said. Office Live customers will get 24/7 support via email, chat, and phone.

Conclusions

Microsoft Office Live is far more exciting and valuable than I had originally believed. Because of the sheer number of Windows Live services, and the fact that many of them were known quantities before the November announcement, it was easy to place more emphasis on those offerings. But after seeing Office Live in action and understanding the scope and depth of what Microsoft is offering here, I'm starting to think that the company has a real hit on its hands here. On a more general note, it's nice to see the software giant creating interoperable software and services that are not arbitrarily and artificially bundled but are instead offered as valuable products in their own right, free to compete in the open market. I'm looking forward to providing a later review of Office Live, in which I'll detail my hands-on experience with the service. In the meantime, the IWS division at Microsoft seems to be on the right track.