Microsoft took the wraps off its Office Live Workspace service Monday, at least for those users who preregistered for the software in October. It will be weeks to months before the service -- which lets users store their Office documents online -- is available to the general public.

Office Live allows users to post files created in Adobe Acrobat and Microsoft Office formats and share them with other users. Unlike Google Docs and similar online apps, users still need Microsoft Office software, such as Word, Excel, and PowerPoint.

"We think that Office Live Workspace will be important for our 500 million Office customers because it's one of the first tightly integrated Web-based sharing and collaboration services designed to give a seamless experience for Office users," Kirk Gregersen, who directs product management for Office on the consumer and small business side, said in an announcement.

He hailed the service as a "good example" of Microsoft's "software plus services" approach.

Toward Seamless Online Editing

Both Office Live Workspace and Google Docs are described as "cloud" computing because they store the data on remote servers instead of on the user's hard disk. With Internet access nearly ubiquitous, storing files remotely gives users the advantage of being able to access a file from a laptop while traveling or from any desktop machine.

It also facilitates collaborative editing and revision management. Users are "frustrated with the confusing free-for-all that can result when multiple versions of documents circulate in e-mail attachments that then have to be manually pulled together by the original author," Gregersen said. "We're hopeful that Office Live Workspace helps solve these challenges by providing a place online to keep a single version of a document that everyone can work on."

While users could always upload their files to corporate servers or Web-based storage services, these are hardly seamless options. And while Google Docs allows users to upload Word files, the online editing tools are extremely simple compared to the power of Microsoft's software offerings.

Accepting the Cloud

"The challenge for Microsoft is how do you compete with the free cloud of Google and the others without creating something that makes it unnecessary to buy your product," Greg Sterling, principal analyst with Sterling Market Intelligence, said in a telephone interview.

Microsoft's service "probably answers some of the collaborative nature of Google Docs," Sterling said, but Google's vision for online documents "is becoming much broader and quite different," Sterling said. For instance, Google is incorporating small business applications based on Jotspot, the recently acquired Wiki technology. "Their vision for it is broader than just an Office competitor," Sterling said.

Tim Bajarin, principal analyst with Creative Strategies, said small businesses are slowly warming up to the idea of cloud-computing applications, "especially if they can be used to collaborate with workers inside or outside the company."

To win acceptance among small and midsize businesses, Microsoft and Google need to show how these online applications are powerful collaboration tools that allow small businesses to cut down on I.T.-related expenses, he said. "Over time, it will become an important technology that many small businesses will adopt to keep I.T. costs down as well as allow them to make it more efficient to work with partners," Bajarin concluded.