So, Microsoft announced its software-as-a-service strategy. What’s really interesting here is that the Redmond crew has done it again--identified a sea change and turned its lumbering ship around on a dime by grabbing someone else’s rudder (think the Web and Netscape).

Now it’s all about online apps, often built with Atlas (Microsoft’s version of AJAX) and launched into the world as "beta" long before Microsoft would normally release packaged products.  They’re even supporting the lot with advertising.

It’s a pretty bold admission that Microsoft thinks it at least needs to hedge its bets about where software is headed, even if it isn’t ready to completely give up on its traditional model.

It also shows that Ray Ozzie is being given a chance to really get some things done--and fast.

The key, of course, is whether these products actually generate any buzz beyond the announcement. Every time Google rolls out something new, it seems to generate a wave of online conversation--they have a real knack for creating cool. Online Office? We’ll see if it has the same effect. For now, if you visit www.live.com , you’ll see a so-so collection of "gadgets" including things like a spiffier front end for Hotmail, weather forecasts and a horoscope generator that skips between predictions as you mouse over a zodiac symbol--hardly awe-inspiring. 

If Microsoft can turn live.com into a significant online destination, a place people regularly visit to find cool new tools, then they’ll be on their way to dealing Google a serious blow. This will be especially true if Bill, Ray, et, al, can make it a destination for corporate customers looking for CRM and other line-of-business apps.

We’ll see if the internal conflicts Microsoft is bound to face over this new model let that really happen.

Microsoft’s also promising to be open with these new tools. While live.com doesn’t yet support Firefox, for instance, the site promises to do so soon.

And, as my colleague Scott Berinato says in his current CIO article, .Net, Web Services, and the End of the Vendor Era : After decades of holding customers captive inside the walls of proprietary software, Microsoft and its competitors are selling products such as .Net that help tear down those walls."