Microsoft Word in a web browser through Office Web Applications.

Microsoft, looking to one-up Google Apps and other online productivity suites, will give companies the option of running the upcoming web-based versions of Word, Excel and other programs from their own servers, not just from Microsoft's remote data centers.

The approach plays to Microsoft's strengths and customer base as the company adapts its widely used Office programs for the online world. The company believes the on-site Office Web Applications will be "a huge differentiator between us and all of the Web 2.0 competitors like Zoho and Google or whoever," said Chris Capossela, senior vice president in Microsoft's Information Worker business.

Microsoft is years behind Google and others in offering Web-based productivity software, but the Redmond company has the advantage of a dominant position in desktop software. Office Web Applications will be lightweight versions of Word, Excel, Powerpoint and other programs that will provide basic authoring, editing and sharing functions inside a browser. Announced last year, they're due out in 2010.

The move is part of an escalating war between Microsoft and Google. The Mountain View, Calif.-based search giant last week announced plans to offer its own PC operating system, treading into an area that Microsoft Windows has long ruled. At the same time, Microsoft is attempting to make headway against Google in the search market through the release of its Bing search engine.

The plans for on-site Web Apps are part of a series of announcements expected to be made by Microsoft this morning at its annual partner conference in New Orleans.

The company today is also releasing an invite-only technical preview of the upcoming Microsoft Office 2010 desktop software to tens of thousands of testers, progressing toward a public beta release later this year and a final release in the first half of next year.

In addition, the company is announcing plans to streamline its lineup of Microsoft Office editions to five from the previous eight. It's also showing new features of the Office 2010 desktop software, including plans to expand the "ribbon" interface -- introduced in the core Office 2007 programs -- to all of the applications in the Office family, including the Sharepoint collaboration software.

Not included in today's technical preview release are the Office Web Applications. They're slated to be demonstrated at the Worldwide Partner Conference in New Orleans, but testers aren't expected to get their hands on that code until later this summer.

When they're ultimately released alongside Office 2010, the Office Web Apps will be available to consumers through Windows Live at no cost, supported by online ads. In addition, Microsoft still plans to offer Office Web Apps to businesses as pure "cloud" services, from its own data centers, through its subscription-based Microsoft Online services.

But it's betting that some companies will feel more comfortable running the Office Web Apps from their own servers. That's the thinking behind the decision to package Office Web Apps with the traditional Office desktop software for companies that buy Microsoft Office under volume-licensing agreements.

Microsoft's Capossela compared the on-site Office Web Apps alternative to the way companies currently use Microsoft Outlook Web Access to let employees send and receive email, among other features, through a Web browser when working remotely.

Microsoft says it will provide that on-site capability to any company that buys the traditional Office software suite through future volume licensing agreements. In addition, customers with current annuity-based Microsoft Office volume-licensing deals will be given access to the on-site Web apps as part of their existing contracts.

That annuity segment alone is a potential market of 90 million people, Capossela said. Combined with about 400 million Windows Live users, that makes the potential market for the Office Web Apps nearly a half-billion people.

That's good and bad for Microsoft. Because the Office Web Applications will offer basic functionality for free, some people will be able to get by without actually paying for the software -- which has traditionally accounted for billions in Microsoft revenue.

But the company isn't too concerned about potential cannibalization of its traditional software business, Capossela maintained. He noted that many people have already been using "borrowed" copies of Word or sticking with older versions. And beyond a certain point, he said, the browser-based experience doesn't live up to traditional desktop software.

"It's just not a great experience to write an 11-page document" in any browser-based word-processing application, he said, describing that as the average-sized Word document. "Could you make it work? Of course you could. But if tell you that Office Home and Student is $100 on Amazon.com today, and you can install it on two or three machines, and it lasts forever, it's a pretty amazing value."

Microsoft hasn't yet announced pricing for the Office 2010 desktop applications or Web-based subscription offering.