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It is not unheard of in the fast-moving software industry for big companies to announce products before they are ready, to place their imprimatur on the latest technology trend.

Microsoft’s November 2005 “Live” software announcement – its spin on the emerging on-demand software model – is not quite “vapourware” but it represents a holding operation, say analysts, while the software group fleshes out its offerings over the coming year.

Windows Live and Office Live, hosted on Microsoft servers and available free over the internet, supported by advertising revenue, or as subscription-based services, represent a radical shift for a company that has amassed a dominant share of software sales by selling individual licences for products installed on computer hard drives.

Instead of the customary years-long upgrade cycle of its Windows operating system and Office desktop suite, Microsoft corporate vice-president Blake Irving promises a “rolling thunder” of Live software releases this year.

But, so far, both offerings have a distinctly warmed-over, hastily cobbled together feel, say observers, reflecting the market pressure Microsoft and other conventional software vendors are coming under from the threat posed to their cash cow products by growing interest in software as a pay-as-you-go utility.

In spite of their names, neither are on-demand versions of Microsoft’s signature products.

“Live is a branding strategy as much as anything else,” says Matt Rosoff of analyst Directions on Microsoft.

Windows Live consolidates enhanced versions of Hotmail and Messenger, the company’s popular e-mail and instant messaging services, plus other offerings hitherto linked to its MSN portal, into a common web-based interface, also featuring free virus scanning, a premium subscription-based security service and space for users to store their internet bookmarks.

“It’s the latest iteration of MSN, focused on services [rather than] content and the portal,” says Mr Rosoff.

Meanwhile, Office Live, pitched squarely at the 28m businesses worldwide with fewer than 10 employees, bears more than a passing resemblance to bCentral, an earlier Microsoft-hosted electronic commerce and web design service for small businesses that never quite caught on, say Mr Rosoff and on-demand software analyst Phil Wainewright.

Positioned as an online supplement to Office, it spans a free, ad-supported tier, offering web hosting, five e-mail accounts and web design and web traffic tracking tools; and, for a fee, 50 e-mail accounts, snazzier web tools and a selection of productivity programs.

Microsoft’s hand has been forced in part, say analysts, by companies such as San Francisco’s Salesforce.com, which has persuaded a small but growing number of customers to buy into its “business web” vision.

This lets companies cherrypick their software over the internet rather than incurring the overheads of installing and managing it themselves (see Way Forward for the Web, below).

Similarly, search engine Google in 2004 parlayed its online franchise into a rival web-based e-mail service, Gmail, that makes Hotmail look decidedly antiquated, says Mr Rosoff.

The strategy is also aimed at cornering a greater share of the rapidly growing online advertising market, he adds.

In Microsoft’s favour, Mr Irving notes that, in Hotmail, it has the largest on-demand service, with more than 215m active accounts.

Meanwhile, in two years, Xbox Live, the company’s online gaming platform, has garnered more than 2m customers.

Then there is the leverage of its installed base of at least 600m computers worldwide running Windows and 400m Office users.

But Microsoft is unlikely to embrace the on-demand model too widely for fear of undercutting more profitable licence sales, suggests Mr Rosoff, who says on-demand versions of Word, Excel and PowerPoint, for example, are unlikely soon.

“Microsoft has no choice but to move in this direction,” says David Smith, vice-president at IT industry watcher Gartner.

“But don’t expect the company to be aggressive in accelerating a move that is not necessarily in its best interests.”

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