Can Microsoft Azure beat Google's Cloud offerings?

Microsoft's new product launch counters what many tech commentators thought the preeminent software company would never do. "A lot of people say we will see pigs fly before we see Microsoft Office running in the cloud," said Tim O'Brien, Microsoft's senior director of platform strategy. "We are betting big on the cloud with our most successful product, and we are investing heavily both in the product engineering side and the physical infrastructure side."

"The history of our industry has shown that it is quite fashionable for disruptors to write off the existing market players while the existing market players have an opportunity to reinvent themselves as a business."

The tools, to be released for consumer use in June, will be offered free to Microsoft's more than 500 million users of Windows Live services like Hotmail and Live Messenger, the company said. A technical preview of Office Web Apps is available now via SkyDrive, Microsoft's online storage service. Microsoft will also offer the online productivity suite to the more than 400 million users of Facebook. Analysts say business is where Microsoft stands to make the most gains in the cloud.

"There are millions and millions of existing customers of Microsoft who have familiarity and affinity for their products," said Sheri McLeish, an analyst with Boston-based Forrester Research. "Microsoft is, if nothing else, pervasive."

More than 2 million businesses run Google Apps with more than 3,000 signing up each day, according to the company. Norton says one of the biggest challenges for Microsoft is whether it innovate rapidly in the ever-changing environment of the Web, pointing out that Google had an "optimized" version of Gmail available for the iPad almost immediately after Apple released the device last month. The search giant is also continuing to release new features on Google Labs, its site used to demonstrate and test new products, he said.

Where Microsoft stands to loose the most ground is not with the consumers of today but with younger generations using iPads instead of laptops and writing notes via social networking sites instead of Word documents.

Microsoft Azure made a major leap skywards this week with the release of a cloud-based version of its Office software to businesses called Office Web Apps

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