For the last several years I've been asking Microsoft people from Steve Ballmer down (transcipt with link to video here) whether there is a lab in darkest Redmond where engineers are assembling a version of Office for the Web. The answer, well-drilled as ever with Microsoft, has been 'Why would we need to do that when Google Docs isn't that popular/when you can already save files to the web/when you really need the power of a true desktop client?' Nobody ever answered the straight question with a 'yes' or 'no'. So that would be a 'yes' then, I thought, with the deductive reasoning and abstracted insight of a Father Brown.
The problem for Microsoft of course is that the golden egg of Office is continuing to lay and the rival web-based applications like Google Docs, Zoho and others are ultra-cheap or even free, so it had to step lightly. Microsoft is now previewing a suite of free, web-based tools, named Office Web Apps, that are deliberately limited in their capabilities. You'll find Word Web App, Excel Web App, PowerPoint Web App and (soon) OneNote Web App, all with key limbs surgically removed. The nature of the amputation could change (printing? versioning? word counts? bar charts?) but the certainty is that if you're being cheap you'll get a cheapened product.
Office Web Apps are intended to be not so much kissing cousins as distant relatives from web-land to their disk-bound paterfamilias. The idea is that you use them at a pinch, note the missing grace notes and insist on spending large sums on the grown-up version. The not-so-subtle implication is that Office is fine Barolo wine, Office Web Apps is Rola Cola. Office is Bob Dylan, Office Web Apps is Jakob Dylan. Office is the 7 Series, Office Web Apps is the 3 Series that means men will laugh at you behind your back and sneer at you to your face.
Microsoft's chosen pejorative for Office Web Apps is 'lightweight' (as in 'if you can't down that pint in one you're a lightweight', presumably) and it is doing everything it can to get it into your head that the free versions available through Windows Live are not The Real Thing. There will be extensions to Office, versions for managing Office Web Apps in-house through SharePoint, and differently hosted versions -- all of them requiring your cold, hard cash.
Will Microsoft succeed in bridging to a promising new model for accessing apps from any device with a browser without stemming the Office flood of revenues? Perhaps, if customers feel that web tools don't have the satisfying 'thunk' of their disk-based equivalents and use them only occasionally, but the stakes are high. Users of Office Web Apps don't need to be Windows users or even IE users. A dual franchise worth billions of dollars annually is on the table here.
Many CIOs I've been speaking to are very keen on getting away from the high costs and file format constrictions of Office. They've looked at Google Apps and many of them have already pushed the button or are on the verge of doing so. However, the probability is that by various value sweeteners, with a client and web tools line-up and the strength of an excellent product, Microsoft will keep the majority of big customers onside for years to come, albeit at the expense to itself of a significantly reduced tariff.