First look: Office 365 beta shows promise but lacks polish

The more Google's Web-based services encroach on Microsoft's traditional markets, the more Microsoft seems determined to bring the fight to Google's home turf by offering online services of its own. Redmond's first stab at cloud services for business was Business Productivity Online Standard Suite (BPOS), a package that bundled hosted versions of Exchange, SharePoint Server, and Communications Server. Now it's ready to try again with Office 365, a revamped offering that combines the features of BPOS with Office 2010. From what we've seen of the Office 365 beta, it still has a long way to go before it can be considered a true turnkey solution for business.

Microsoft plans to offer Office 365 in a number of service tiers, ranging from a stripped-down small-business version to one packaged for large-scale enterprises. The most attractive tiers bundle a full license to Office Professional Plus 2010 for each user, which is arguably Microsoft's greatest advantage over online-only competitors such as Google Docs. You can save a little money if you already have your own Office licenses or if you plan to conduct all your document management in the Office Web Apps -- but we think the latter is unlikely.

[ Also on InfoWorld: Dueling demos of Microsoft Office 365 and Google Cloud Connect bring the two titans' larger-than-life struggle into sharp relief. See "Microsoft and Google launch new assaults on the cloud." ]

When users first log in to Office 365, they're greeted by a friendly home page that allows them to navigate to various components of the suite. If your service tier supports it, users can download their copies of Office Professional Plus 2010 directly from the home page. Unfortunately it's not the Click-to-Run version of the suite we saw demoed when Office 2010 launched. If you deploy the suite from Microsoft's servers, it's a 600MB download per seat; realistically, you'll want to set up an alternate distribution system on your LAN.

What is different about this version of Office 2010 is that it's fully subscription-based. The installer obtains a product key from the Office 365 servers automatically, which presumably will be revoked if you ever let your subscription lapse. That makes installation a one-click, hands-free procedure, but we still question whether the subscription model represents real value for this category of desktop software. The supporting Web services will make or break this kind of offering.