Network World — Microsoft often uses the phrase "feature parity" to describe its vision of providing cloud computing services that closely replicate the capabilities customers can already get by installing Microsoft (MSFT) software inside their firewalls. After all, Microsoft is "all in" for the cloud, as Steve Ballmer says.

While Microsoft's hosted Exchange and SharePoint will achieve most of the desired feature parity within the next year, Microsoft admits it has no plans today to provide the same parity with Office Web Apps, the Web-based versions of Word, Excel, PowerPoint and OneNote.

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Office Web Apps, released in June, provides a "high-fidelity viewing experience," but only limited editing capabilities, says Evan Lew, senior product manager for Microsoft Office.

Lew blames the disparity on the limitations of current Web browsers (of which the most widely used is Microsoft's Internet Explorer).

"It has to do with the capabilities of the Web browser and the limitations today," Lew says.

With the addition of HTML5 "the lines [between PC and browser] may start blurring," he continues, but as of "today, there are performance reasons why editing, video and PowerPoint is something that is a much better experience in the client than in the browser."

Microsoft touts the ability to import Office documents into Office Web Apps without losing formatting -- a supposed advantage over Google (GOOG) Apps -- but editing scenarios like inserting charts or pivot tables into Excel and editing videos require the horsepower of the PC and native desktop client, Lew says.

Microsoft is meeting the challenge from Google Apps by providing some online capabilities, but likely doesn't want to give businesses a completely Web-based alternative to replace the more expensive Office, Forrester Research analyst Sheri McLeish said in a recent interview.

"They're walking a very fine line," McLeish says. "While they're nervous and worried [about Google Apps], they're not nervous and worried enough to dramatically reduce the cost of Office. They're delicately managing the pricing to protect their margins."

Regular Office licenses give customers rights to use Web Apps, but a full-fledged cloud offering "is not going to happen in 2010," McLeish says.

Things are a bit different on the hosted Exchange and SharePoint front, at least according to Microsoft's spokespeople.Formally known as BPOS, the Business Productivity Online Standard Suite, Microsoft's hosted Exchange and SharePoint is still running on the 2007 servers.  But a planned upgrade to the 2010 servers will erase most of the feature differences between the hosted and on-premise versions, according to Microsoft.

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