2010 is a big year for Microsoft. While Bill Gates prepares for the imminent release of the latest version of Office (predictably titled ‘Office 2010’), it’s his company’s debut appearance in the world of cloud-based applications that has sparked the most intrigue in marketing circles.

After four years of development, Windows Azure was finally released to the general public earlier this year, providing developers on-demand computing, storage and networking to host, scale and manage more than 3,500 apps in Microsoft data centres via the Web.

And on May 12, ‘Office Web Apps’ will join the party. The ‘Office Web Apps’ are the first web-based versions of the outrageously popular Office package of Word, Excel, PowerPoint and co. This will be the first time that the individual components (applications) of Office will not live solely on the desktop.

Confused?

First, let’s be clear what Cloud Computing actually is. Cloud Computing is a new IT strategy that has software and/or hardware run or accessed over the Internet, which can otherwise be termed a ‘cloud’. The advantage of the ‘cloud’ is that companies do not have to lay out the capital for individual pieces of software and bulky servers they can lease it instead. Its more cost effective and diminishes the need for extensive IT dept.’s etc.

This move has no doubt been influenced by the success enjoyed by Google’s ‘Google Apps’, which already performs functions virtually identical to that of the Microsoft Office package. 7.5 million people have already downloaded the beta version of Office 10, which has been available to use since November, to mostly positive reviews.

According to Paul Hales on Thinq.com, Microsoft intends to release ‘Office Web Apps’ for free in order to rival Google and make their money through cloud based advertising. Freebies and Microsoft haven’t ever gone hand-in-hand in the past, but the popularity of Google Apps has forced them to build a product with no monetary cost to the consumer.

“Google says it has no plans to put ads on its Docs, but it goes against the grain for Microsoft to give something away for nothing,” says Hales. “Especially when the Office Business Division raked in $19 billion in sales in fiscal 2009 and generated some $12 billion of the company’s overall operating profit of $20 billion.”

Sarah Friar, an analyst at Goldman Sachs who follows Microsoft, said: “As the world goes increasingly more and more mobile, the way people want to access and use applications is increasingly shifting to the Web.

“Google becomes the face of that beast, but I think it’s a broad industry shift, not just Google, that is bringing Microsoft around to this.”

And now the marketing battle begins. Will Google Apps be able to fend off the challenge of ‘Office’, which has been part of the desktop furniture for well over 15 years?

As Andrew Mitchell, of Pique News Magazine highlights, the crucial factor could be a matter of practicality. He says:

“Business people still rely on Office software, including Word, Excel, PowerPoint and Outlook, and generally want their new software and files to be seamlessly compatible with their previous software.”

Or  could it ultimately boil down to the nature of individual businesses? Those who have already converted to cloud computing may well have adopted Google Apps to their system and will be reticent to change it. If an office is comfortable with one tried and tested approach, a quick switch to Office is a process of unnecessary upheaval.

Conversely, more established, larger businesses who have yet to take the plunge into cloud computing may see the introduction of recognised Office Webs Apps as a doorway to slowly integrating the concept into the workplace.

The Microsoft brand commands credibility, but will it command new followers?