Microsoft announced yesterday its plans to soon provide online versions of some of its products, including Excel, OneNote, Word and PowerPoint which will all run in a Web browser.

Janice Kapner, head of communications for Microsoft's "information worker" group, explained that the company’s Professional Developers Conference, which began earlier this week, was the perfect time to present its upcoming plans. "We're here sharing at PDC so that people recognize that Office is part of the bigger strategy for the cloud," she said. "I know people have been talking about this stuff for a long time, but customers ... are really now embracing it much more than just talking about it," she said.

The company’s decision to step up its game and bring new features to its offer is a direct result of Google’s success with its online productivity products Google Docs and Spreadsheet. Even though Microsoft dismissed the idea that Google might represent a real threat to its business, its actions show that the fear exists. At this point, Office has more than 500 million users worldwide, bringing in more than 31 percent of the company’s total revenue in 2008, and the potential in this transition from software apps to online apps is huge.

The new Web-based Office will be available in Internet Explorer, Firefox and Safari. For now, the pricing strategy has not been presented, but it will probably feature free ad-supported options and also subscription services.

“We raised the stakes with Office Web applications. With this development, people can benefit from Office as a service on their browser, as a downloadable application on their phone, and as software on their PCs,” explained Chris Capossela, senior vice president, Microsoft Business Division. “This is the kind of flexibility that our software plus services approach makes possible, and is helping us deliver the kind of innovation that businesses and consumers expect from Microsoft.” He also added that the company is focused on offering customers the technology needed to handle their activities in the best possible way and that the thing that sets them apart from the other companies is the long term investment made with all of its projects.

The competition in this segment is very likely to get tougher, with Google and Microsoft facing a real challenge from Zoho’s suite. Google and Zoho might have a head start but Microsoft is looking to make up for lost time and use the awareness on online products raised by the first two companies in its advantage.

Zoho offers a very comprehensive suite of Web-based programs perfect for small businesses and individual use. It provides an email service, an online word processor (Zoho Writer), spreadsheets, an online presentation tool (Zoho Show), an online document management feature (Zoho Docs), an online note taker, easy to use full-featured Wiki, a centralized public repository, an online organizer (Zoho Planner), on-demand CRM solution, a project management software and several other features.