Looking at the headlines in the business and IT press, you would think that Microsoft had radically shifted its strategy with the announcement of Windows Live and Microsoft Office Live. Without digging into the details, it sounded as if the software giant and taken the radical step of creating a Web-based version of its dominant operating system and office productivity suite.

However, in reality, Microsoft is extending its two most powerful brands with some new, already announced, and existing online offerings. These services will either be free, ad-supported services or available with a subscription.

The idea is to outdo competitors, particularly Google, and capture ad revenue by providing compelling, no cost services, as well as creating predictable revenue streams with subscription-based offerings.

Windows Live rebrands existing and already-announced services

Windows Live includes a personalized Web page, a Web-based email account, an instant messenger client, Safety Center for finding and removing viruses, OneCare for maintaining PCs, and Favorites for providing online bookmarks. Some of these services will be available for free, based on an advertising model (powered by MSN adCenter); enhanced options will be available on a subscription basis.

As for extensibility, Microsoft says there is opportunity for third-parties to tap into the new services:

"Windows Live extends the capabilities of Windows through standard mechanisms that are publicly available for use by the developer and partner community."

Microsoft Office Live provides new online services for small businesses

The initial business-oriented offering is aimed at small businesses. This is not a Web-based version of the Office suite, despite the name. There will be multiple versions of the offering. Here's how Microsoft describes the tiered service, due in beta in 2006:

"Office Live Basics helps a small business establish an online Internet presence including a domain name, a Web site with 30 MB of storage and five Web e-mail accounts at no charge through an advertising-supported model. Office Live also provides a set of subscription-based services with more than 20 business applications to help automate daily business tasks..."

As with the WIndows version, Microsoft says Office Live will be extensible by third-party developers.

Another confusing extension to and dilution of Microsoft brands

With the Live announcement, there are many brand issues that Microsoft, its customers, and the media will struggle with. This over-extension and dilution of Microsoft brands appears similar to previous brand issues the vendor instigated, such as its rebranding of almost everything with .NET and the explosion of the Windows family brand.

Customers and the media will be confused as they try and figure out issues, such as:

• Why is it called Windows Live Virtual Earth? Microsoft mentioned a third-party developer that plans to deliver a commercial real estate solution based on Virtual Earth. Since Windows Live is for consumers, why wouldn't Virtual Earth be under the Microsoft Office Live umbrella?
  
  
• Why is there still an MSN? What will be the difference between the MSN.com brand and the Windows Live brand? What brand should consumers gravitate towards? Should consumers sign up for MSN Hotmail or Windows Live Web-based email? How will they be advertised and marketed?
  
  
• How many products will Office cover? With the recent company reorganization and with the Office Live announcement, the Office brand seems to have taken over a massive amount of offerings. For example, as of this QuickTake, the Microsoft Office Online Web page includes the following products: Word, Excel, PowerPoint, Outlook, Access, FrontPage, InfoPath, Live Meeting, OneNote, Project, Publisher, Small Business Accounting, Visio, Business Scorecard Manager, Live Communications Server, Project Server, SharePoint Portal Server, Windows SharePoint Services Technology, Microsoft Content Management Server, and Microsoft Exchange Server. Just what is the Office brand meant to convey these days?
  
  
• What exactly does a "Live" service mean? The new Windows and Office Live offerings share the Live brand with Microsoft's existing and soon-to-be updated online service: Xbox Live. This means that there are now three variations of Live targeted at gamers, consumers, and small businesses. Will there be more LIve offerings? Logically, it would seem that mid- and large-size organizations should get the Live treatment at some time, so perhaps we will see future brand extensions. How about Office Live for Enterprise?
  
  

Announcing Live: Not much to get excited about yet

This latest Microsoft announcement, though compared in scope to its famous embracement of the Internet in the 1995, is underwhelming and will cause market confusion. It is similar to the recent Sun and Google announcement, in that it generated a lot of noise but didn't change the market despite each company claiming it was a significant event.

New Rowley still believes that hosted services are important, but not the endgame for the IT industry. Predicable revenue streams based on subscriptions are a software CEO's dream, but the reality is that subscription only make sense some of the time.

In the consumer world, it's been a struggle to convince consumers that a subscription-based music model is preferable to purchasing music downloads. With monthly cell phone, cable, and other bills, how many more subscription offerings will consumers buy into? As for organizations, each will have its own reason for sticking with traditional licensing schemes or moving forward with subscription services. Software subscriptions are not one-size, one-industry fits all solutions.

Microsoft's crown jewels remain its operating system and Office productivity suite software. If Google moves forward and delivers a Web-based OpenOffice.org offering, Microsoft will have to respond with a real Office Live service that includes Word, Excel, and perhaps PowerPoint. And that, not the current LIve announcements, will really be an event to take note of.