Microsoft announced that it is working on a lightweight version of its Office productivity software called "Albany," serving as an alternative to the rise of Google Apps, Zoho, and other web-based applications in the consumer space. While this is a good start in Microsoft admitting that software as a service (SaaS) will be the future of computing, they should consider making the service free of charge and fully Web-based.

Albany will combine the consumer version of Office with its OneCare security suite. It will include Word, Excel and PowerPoint, and a plug in for Live Workspaces, an online repository to share Office documents. It installs these applications all at once, rather than piecemeal, making less maintenance work for the user. People will be able to purchase the products online on a subscription basis. Microsoft has not, as of yet, specified the price or if it will be by the month or year.

Simply put: it’s a hybrid model between on-the-machine software of old and in the cloud services of new. While Albany doesn’t offer a departure from installed software, it allows users to work online more freely with Microsoft products and receive updates to that software seamlessly (should they keep paying subscription fees).

A free model would have been more significant, however, and it would be better for Microsoft’s business over the long run and for users craving continuity between their technology experience at home and at work. (As the New York Times’ BITS blog noted, a new sharing toolbar in Albany might indicate that Microsoft is considering such a free version.)

Microsoft’s reluctance to move to such a model makes sense: it already has the favor of CIOs, who are willing to pay plenty of money for enterprise versions of Office.

But Microsoft needs to re-win the hearts and minds of users at home, especially younger ones, who won’t accept that they must work with a piece of software and pay for newer versions simply because their parents did or the CIO tells them "this is the way it is."

These new workers entering businesses today have grown up with free software (IM, web-based e-mail, and social networks, etc.). The idea of ponying up a monthly fee to Microsoft for Office, out of their own pocket, is becoming a stretch, especially if such a service exists for free on the Web (in the form of Google Apps and Zoho, mainly).

This is not to say Microsoft shouldn’t want, or deserve, to continue making a buck for their Office software – businesses will continue to pay for more beefed up versions they believe to be more secure.

But if Microsoft were to show goodwill towards users in the consumer space by offering lightweight versions for free, that generation might be content to actually use the enterprise version when they go to work everyday since it mirrors what they use at home, at school, or any place, on any machine.

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