Office Live: Application suite or platform?

Interestingly, Richard thinks that an online Office suite is inevitable from Microsoft, and even Google. But here I tend to be with Google's Sergey Brin, who made this very astute observation at last year's Web 2.0 Conference (courtesy of our very own Dan Farber):

I don't really think that the thing is to take a previous generation of technology and port them directly, and say can we do the minicomuter on the Web on AJAX makes sense. I'm not saying that's what [Microsoft] Office is, I'm just saying that I think the Web and Web 2.0, if that's what you want to call it, gives you the opportunity to do new and better things than the Office package and more. We don't have any plans  [to do an office suite].

In one fell swoop, Brin completely dismisses Google from doing an office suite and yet leaves the issue a little murky by saying 'better things' can be done, presumably by them.  Will Office Live ever really compete with smaller companies that can relentlessly innovate for a fraction of the cost, the savings of which they can pass on to their customers? I believe Microsoft is in a somewhat similar position, not wanting to cannabalize the sales of one of its most successful and profitable products, while realizing that a direct port probably doesn't make sense and that the concept of an online office suite requires some serious reinvention.

What's also clear with Office Live is that Microsoft is using this as an experiment in Web-based business models.  Office Live Basics, the free version of Office Live, is supported entirely by advertising, presumably via the new MSN adCenter product.  The other two offerings, Office Live Collaboration and Office Live Essentials are subscription-based.  It'll be interesting to see if the likely popular Basics product will be profitable or a loss leader to build marketshare.

What's not clear until the service is actually available (my beta subscription wasn't active at the time of this writing though a Microsoft representative confirmed that users would get in today), is if Microsoft has just put some lipstick on its aging Sharepoint and Frontpage services, or is it adding real value?  Scrappy companies like 37signals have been offering extremely capable products in this space for a while and are a year or more ahead on their maturity curve and capturing customers comfortable with online software.  Will Office Live ever really compete with smaller companies that can relentlessly innovate for a fraction of the cost, the savings of which they can pass on to their customers? 

The area where I really get interested in Office Live is here: Is it a platform or another series of fairly generic corporate standalone products?  Is Microsoft going to go the Salesforce route and offer up the individual features of Office Live for integration and incorporation into other applications?  The platform route makes sense if it has features that are of strategic competitive value and are best of breed, or close to it.  Because if you have a genuinely better online product, folks will beat a path to your door to build on top of you.  Look at the growing number of search engines based on top of Google's for example.

So I put this question to Microsoft yesterday: "Is Office Live being positioned as a platform that others can add services to sell to small business (i.e.  to create 'gadgets' or even mashup wholesale)?  Or is Office Live more of a self-contained (i.e. closed) set of apps on the Web, at least for now, and what you see is exactly what you get?"

I asked this since Office Live as a true platform makes a lot more sense than a hosted rehash of existing products. And it would allow them to harness the creativity and innovative energy that is presently driving a brilliant new generation of Web-based software.

The answer came back from Dean Nicolls, Senior Product Manager of Microsoft Information Worker Services Group, and was fairly encouraging:

The Microsoft Office Live platform expands opportunities for partners to supply customized solutions for small business customers through a scalable and cost effective manner.  Microsoft Office Live enables partners to increase their productivity and become more profitable by removing on site delivery costs and makes it possible for them to focus on providing customized business functionality that is of a high value to the small business. The value to small businesses is in receiving affordable and customized business solutions. The opportunity for ISV partners is primarily in the area of custom application development.  More complex applications including binary code will not be supported.

We will be closely working with developers and a targeted group of US ISVs over the upcoming year to solicit partner feedback and do some pilot programs.  Our partners will advise us on how to structure the partner engagement model as well as provide insights around how to optimize these services for our joint small business customers.

For those of you that parsed all of that, Microsoft does indeed consider Office Live to be a platform (first sentence) that partners can build from.  Nicolls says that pilot programs for ISV will start over the next year, though there will be limitations. 

This is much more encouraging that the initial product release would indicate and implies that Microsoft's vision for Office Live will not only continue to evolve but will create a foundation for an ongoing series of products, including those of other partners.  This is something the Microsoft's competition in this space is not planning on doing extensively to my knowledge.

On the other hand, while add-ins seem to be supported, wholesale reuse of Office Live pieces does not seem to be.  This also has major implications and if Office Live isn't ultimately an almost completely open platform, where users can safely and easily move all their business data in and out, even to leave and go to competitive services, it may be hard for businesses to commit.

What do you think of online business software?  Are you planning to use Office Live?