Sabeer Bhatia, the founder of Hotmail (which he sold to Microsoft for $400 million in 1998), announced his new company, Live Documents, an online offline productivity suite that also supports integration with Microsoft office.

An excerpt from PC Pro:

Like Google Docs and Microsoft’s Office Live Workspace, Sabeer Bhatia’s Live Documents provides a Web-based word processor, spreadsheet, and presentation applications that can be accessed from any platform.

But it also provides a toolbar for Microsoft Office 2000/XP/2003, and soon Open Office, that synchronizes the desktop application and files created locally, with online files. You can edit documents offline in the Office suit, and they will automatically be synced with the Live Documents version. And this can be done with multiple PCs, potentially making it a handy way to synchronize files across computers.

Instacoll joins a slew of other competitors in the online offline productivity space. The flash-based online suite provides several advantages to corporations and individuals, such as Web-enabling existing applications and providing document management and collaboration features. For individuals, the service will be free.

One question that come to mind is whether wrapping a layer around Microsoft’s Office would be reason enough for making a product successful. Not to mention that down the line Microsoft could be doing the same thing.

And with immense choice emerging in the online offline productivity apps space, will we see another open API platform soon (a la OpenSocial) ?

The Live Documents Web site is currently only open for registration.

Only time will tell if the new software will be unique or add to a crowded niche.

More information:

Live Documents Update : Sounding Better all the time (News.com)

Can Hotmail co-founder take Office online? (iTWire)

Online rival to microsoft office launches (Inquirer)

Hotmail co-founder launches online office suite (MacWorld)