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Microsoft details Office rental plans

The software giant details a long-anticipated plan to begin offering its Office software as an Internet service.

Microsoft today launched a long-anticipated plan to rent its Office desktop software online.

Through a pilot program, providers of e-business services for small and medium-sized companies will offer Office 2000 as an application service beginning in 2000. The leasing program will allow customers to use Microsoft's Word, Excel, PowerPoint, and other Office applications via the Internet, instead of having the Microsoft software installed on their PCs.

Micron Electronics will become one of the first major PC companies to rent Office 2000 to customers as part of the company's subscription computing strategy, sources said.

Microsoft, of course, will not be alone in the rent-a-suite space. Sun Microsystems bought Germany's StarMedia to create similar server-side applications.

Microsoft did not announce pricing for the hosted applications. The standard edition of Office costs $499 for new users and $249 for existing Office users upgrading to the product. Bob Muglia, senior vice president in charge of Microsoft's business-productivity group, told the Wall Street Journal that online services might charge anywhere from $50 to $500 per user, per month for Office.

As previously reported by CNET News.com, Microsoft has been mulling Office rental plans for months.

Participating companies in the pilot program, called Microsoft Office Online, include Micron, Concentric Network, Verio, Digex, Equant, FutureLink, Interland, Interliant, MTT Mpowered (a division of Aliant), Qwest Communications, TeleComputing, Usinternetworking, and Winstar Communications.

The Office applications will reside on servers at these service providers allowing businesses to access the software over the Internet and to outsource many of their business productivity tools.

Office Online will also be offered by Microsoft bCentral Web services, a business portal created to meet the needs of small and growing companies, which will direct users to the Microsoft Network (MSN), Microsoft's larger Web portal site.

Rob Enderle, an analyst with Giga Information Group who has used the new Office Online service, said the new offering is good for consumers because "you can use this to have office applications on your older machines, and you also don't have to worry about upgrading or maintenance because that's all done by the service provider."

Before now, few details of Microsoft's Web-based application plans have come to light. Microsoft president Steve Ballmer told reporters in September that the company was planning to offer Office--which generates between one third and one half of Microsoft's revenues--as a Web-based service.

"We are moving into the next wave of the Web where software and services are delivered together, and we are excited to offer Office 2000 to our customers in this new way," Steven Sinofsky, vice president of Microsoft Office, said in a statement.

The application service provider market, while still in its infancy, is expected to grow to $2 billion by 2003, according to market research firm International Data Corporation.

Enderle said he expects Microsoft to provide a hosted version of Exchange as well, though he didn't say when. He did not comment further on the possibility of Microsoft offering hosted versions of any other back office software.

In June, Concentric said it plans to launch several new hosting services based on Microsoft's Windows server and the Microsoft BackOffice line of server products. At the same time, Microsoft said it will help in the development of application hosting services based on Microsoft technology, which could include Microsoft Exchange email services, Microsoft Windows Media services, and purchasing, financial, and customer relations applications based on BackOffice.

Earlier this year, Microsoft announced a new set of Web-collaboration services based on Office 2000 that will be hosted by Internet service providers Concentric Networks, Verio, InterLand, and AIS. The new service allows users who don't have a Web server on site to collaborate on Office documents over an ISP-supported link, Microsoft said.

For software makers, centrally-hosted applications could help stem software piracy--providing better insight into customers' software usage patterns--and lighten customer support loads, as hosted software won't require as much installation assistance.

The push into the rental market by desktop software makers marks a radical change from the traditional pricing and implementation models for these bulky desktop application suites. Instead of installing hundreds of megabytes worth of software on their hard drives, users could opt for a Web-hosting rental model that could save money and provide simpler software management.

All three major developers of desktop productivity suites--Microsoft, Lotus, and Corel--have either rolled out or are evaluating a Web delivery model for their suites, looking to deliver their products through application service providers (ASPs) or Internet service providers (ISPs). Like Microsoft, Corel is outlining deals to make at least some of its products available for rent.

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