Microsoft was put on the back foot today by the announcement of Google’s Office challenger, Apps Premier, its subscription package of premium, business applications hosted online.

For $50 (£26) a year per user, Google Apps Premier Edition will offer business customers a number of web-based applications including email, word processor and spreadsheet. It will compete with Microsoft Office’s desktop-based Word and Excel.

A Microsoft spokesman downplayed the launch, claiming online services such as Google’s are “not alone in altering today’s technology industry. Productivity applications represent a very competitive space in which more than 450 million users around the world have consistently chosen Microsoft.”

The Times (London) says : “Microsoft’s Business Division, which includes Office, accounted for $3.5 billion of the group’s revenues of $12.5 billion in the latest reported quarter, making it the largest source of sales. However, industry insiders say that Google has been quietly preparing for months to tap Microsoft’s cash-cow. Keen to supplement its lucrative search business, Google has built massive data-storage plants, thought to be years ahead of those so far developed by Microsoft and IBM.”

This “cloud” is now being used to host both software and data, while the internet becomes ever more the operating system.

Tom Austin, of Gartner, the technology analysts, said: “This constitutes a real threat to Microsoft’s business model. Eventually, it will have to switch from limited-use licences to software as a service. That will require a fundamental reengineering.”

Despite investing heavily in Office 2007, which was released earlier this month and which, like its predecessors, is anchored firmly to the PC, Microsoft has earmarked $2 billion to develop its own data centres.

The company added that it is now partnering other businesses “to capitalise on emerging services, such as advertising-based software, subscription or on-demand software”.

Most of the Premier Edition components are already available free. “From today, for the first time, it will charge for “white label” tools that carry its customers’ brands, so that e-mail addresses can be in the name of the client company.”

Is Microsoft’s Office suites here to stay or will Google topple its crowning glory. As if replying to Eric Schmidt’s prediction of the imminent demise of desktop software, Microsoft’s Antoine Leblond downplays the threat in a new Reuters interview:

Leblond, who became co-leader of the Office group in June, said Google was the latest in a long line of challengers to the Office software suite … “The simple argument that ‘this is good enough for 90 percent of what we do’ has fallen on its face over and over and over again,” Leblond told Reuters in an interview on Tuesday. “When it comes to mission critical things and key pieces of how people run their businesses, the threshold is higher.”

Microsoft Office 2007 OS would be made available to large business customers on Nov. 30. Retail customers will be able to buy the package in the beginning of the next year at $399. Upgrade version will cost $239.

Following are the key features unique in Microsoft Office 2007:

Ribbon: The traditional menus and toolbars have been replaced by the Ribbon — a new device that presents commands organized into a set of tabs. The tabs on the Ribbon display the commands that are most relevant for each of the task areas in the applications. For example, in Office Word 2007, the tabs group commands for activities such as inserting objects like pictures and tables, doing page layout, working with references, doing mailings, and reviewing.

Button: The new UI brings together the capabilities of the Microsoft Office system into a single entry point in the UI: the Microsoft Office Button. This offers two major advantages. First, it helps users find these valuable features. Second, it simplifies the core authoring scenarios by allowing the Ribbon to focus on creating great documents.

Tabs: Contextual tabs will only appear when they are needed and make it much easier to find and use the commands needed for the operation at hand.

Galleries: Galleries provide users with a set of clear results to choose from when working on their document, spreadsheet, presentation, or Access database. By presenting a simple set of potential results, rather than a complex dialog box with numerous options, Galleries simplify the process of producing professional looking work.

Live Preview: It shows the results of applying an editing or formatting change as the user moves the pointer over the results presented in gallery.

An interesting excerpt from CNet

For years, Microsoft has been trying to add features to Office without them getting in the way of people who already know their way around the software. . . .Unfortunately, the company was a little too successful at making its innovations unobtrusive. In user testing, Microsoft found that nine out of every 10 features that customers wanted to see added to Office were already in the program.

Microsoft is warning of a new attack targeting PowerPoint…..

Just days after patching four bugs in PowerPoint, Microsoft is warning of a new attack targeting its presentation software. “We’ve been made aware of proof of concept code published publicly affecting Microsoft Office 2003 PowerPoint,” wrote Microsoft Security Program Manager Alexandra Huft in a Thursday blog posting. “The reported proof of concept may allow an attacker to execute code on a user’s machine by convincing them to open a specially-crafted PowerPoint file.”

I wanted to let you know that we’ve been made aware of proof of concept code published publicly affecting Microsoft Office 2003 PowerPoint. We are currently investigating this report. The reported proof of concept may allow an attacker to execute code on a user’s machine by convincing them to open a specially-crafted PowerPoint file. We are not aware of any attacks attempting to use the reported vulnerability or of customer impact at this time.