Microsoft gave more traction to its Software-as-a-Service plans with the roll out of Office Live Workspace, which lets users work with Word, Excel, PDF, and PowerPoint files from the Office Suite in a remote and collaborative manner.

An excerpt from InformationWeek:

While Microsoft is perceived as a late starter in the world of Web-based collaborative productivity, it still dominates the office productivity market and online competitors like Google have yet to make any real inroads with the general public.

However, Office Live Workspace is still a humble beginning for the online functionality that will likely find itself embedded into the fabric of Office itself in the future. It’s not a full, online suite of Office applications, but rather a set of collaborative tools meant to work with the Office client apps.

Live Workspace will be accessible to users with a Windows Live ID. With a space limit of 500 MB, users get to assign workspaces for collaborative interaction with multiple users and can also decide on the level of access to various files.

A video of the Office Live Workspace demonstration is available at ZDNet.

Live Workspace is not exactly a completely Web-based productivity suite, but more of an online extension to Office. Microsoft does not believe that this is exactly what its established client base is craving. There are several areas where Microsoft has to still play catch-up, but with the release it has made it clear that they are ready to take on the new entrants in the Office productivity space.

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