Microsoft (MS) announced recently that it will launch free, Web-based ‘lightweight’ versions of its iconic Office applications sometime in 2010.

The MS online productivity suite will include all of the core Office applications: MS Word, Excel, PowerPoint and OneNote.

That will, effectively, put MS in the running with Google and start-up Zoho of Pleasanton, CA, which already offer comprehensive online office suites.

MS has a record of arriving late for the party on major technology trends. Most famously, MS ignored the Internet until online pioneers like Yahoo! and Google had proven there was money to be made there. Then, MS introduced its Internet Explorer browser, which achieved almost instant market dominance — simply because it came free, pre-installed, with every copy of Windows sold thereafter.

The story was ultimately the same with Web search. And, now, MS offers yet another sequel with Web apps.

MS has come under fire for continuing to sell its full, installable version of the Office suite for (US)$400 (Standard version) when consumers/SOHO users can buy a whole new computer for that amount. In fact, Office suite sales were credited with powering MS past Wall Street’s Q3 2008 sales estimates for the software giant — even in the face of a tanking economy.

Industry observers note than many consumer and SOHO users stay with MS Office, upgrade after upgrade, simply because they are familiar (and comfortable) with it and don’t want to deal with the bother of changing over to, and learning, another suite. The question is, where are new users going for their productivity applications?

Answer: Google, Zoho and other free options.

With the advent of a Web-based Office suite, MS positions itself to grab a share of emerging users, rather than relying on its established customer base of SOHO and corporate users — a group which may well shrink in concert with the shrinking economy. But will Web-based Office arrive in time to keep MS’s productivity suite business from irreparable damage?

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