The beta version of Office Live Workspace has one million users just six months after launch, Microsoft announced Wednesday as it released some minor improvements to the service.
"It takes companies years to attract a strong customer base such as this," boasted Microsoft Office product manager Kirk Gregersen. The rapid pace of adoption is a sign of a pent-up market for online access to documents, Gregersen said. Users are "looking for ways to resolve the complexities of their work, school and home projects through a range of choices," he said.

Office Live Workspace is not an online version of Microsoft's shrink-wrapped Office suite but a way for owners of the desktop software to upload, share and collaborate on documents.

Office 2.0 Conference

The announcement came on the eve of the Office 2.0 Conference though Friday in San Francisco, where productivity consultant David Allen was the keynote speaker and more than a dozen startups are demonstrating their products.

Among Microsoft's enhancements are an activity panel, the ability to get e-mail notifications of changes, unique URLs so documents can be bookmarked and linked, and improved support for the Firefox browser.

But many proponents of online office-productivity applications remain underwhelmed with Microsoft's offering, which is expected to leave beta status by the end of the year. A typical comment comes from Cnet's Rafe Needleman: "Yay, Microsoft. Now go back and build the service we want, please."

Ironically, given Microsoft's dominance in the desktop productivity space, the burden now appears to be on Redmond to catch up with Google Docs, which, although it can't compete with the sophistication of Microsoft Office, provides real-time online collaboration in a browser for free.

In the Enterprise

"I believe Microsoft could make an honest Google Docs competitor without killing its Microsoft Office business," Needleman wrote. "Eventually, Microsoft will have to. So it might be smart for Microsoft to encourage people to start thinking about the company as an expansive supplier of productivity solutions -- desktop and Web-based -- rather than just a company that makes desktop office products that, by the way, also have some add-on Web support."

The different approaches reveal three key concerns about cloud computing, said Greg Sterling, principal analyst with Sterling Market Research, in a telephone interview. People are concerned with the depth of the applications, security and downtime.

With the release of Google's Chrome browser and other developments, online applications will become richer over time. But offline access to applications and files will remain requirements for any office suite, Sterling said.

While it may take many years before non-Microsoft cloud applications take off in the enterprise, Redmond must struggle with how to move into the online future. "They have a product that's performed for them historically, and it's difficult to think about moving forward without cannibalizing that product," he said.

Beyond Google Docs

One brand-new challenger to both Google and Microsoft is a startup called ZoooS, founded by Hisham El-Emam and Georg Wuestefeld, who also founded an Ajax development company. The founders call their product "OpenOffice 3.0 in a browser," because it ports Sun's OpenOffice to a completely online environment. The company is focused on the enterprise market, offering a 10-user license for $995.

And in a trick that even Google hasn't quite mastered, the ZoooS applications -- they include a word processor , spreadsheet, presentation program, and even a SQL database -- will be available offline via a small browser plug-in.

"Many companies want to access their files from any location and any device, but they don't want to store confidential files in the cloud," El-Emam, the company's chief executive, said. "Companies can run ZoooS Office locally to maintain complete control over their files while still providing local and remote access from PCs, laptops, mobile devices, and even game consoles."