For fun, here's a snippet from a review for Office Live that nicely frames the new services-oriented strategy we're seeing across the sector. It's not like Microsoft is caught flat-footed, they're just trying to figure out how to leverage their legacy apps rather than be chained down by them:
The nice thing about this model, aside from the healing effect it will have on Microsoft's soul, is that it doesn't require customers to rip and replace what they already have. Instead, customers can determine which Office assets they'd like to use, in both software and service form, and utilize only those things which are of value to them. Cetinok told me that the Live Era changes Microsoft's business model in two ways. First, with the services model, the company can change the way in which it delivers software to users. A single services upgrade instantly upgrades thousands of clients, with no client-side software installs or deployment hang-ups. Second, the Live Era enables a new hybrid business model, where services can generated income for Microsoft in a number of different ways, depending on the situation. "Some of the things we'll do will be advertiser supported, transaction fee supported, or subscription fee supported," Cetinok told me. "It's like TV. Many TV shows are advertiser-supported, but you're starting to see product placement in network TV shows, while many people pay $10-$15 each month to get the premium programming on channels like HBO. There will always be high premium services and products, and those might come with transaction fees or subscription costs, but there will also be services that we can bring to price sensitive segments with advertising."