Productive - but for how much longer?

As far as cash cows go, Microsoft’s Office suite is one of the biggest in the paddock.

Installed on millions of desktop PCs in companies around the world, the package represents a big chunk of the Redmond giant's revenues. Chances are, if you’re working in an office, you’re using Office.

But, just like any major dynasty, Microsoft’s dominance of this segment may be starting to fade. It won’t disappear tomorrow, next week or even next year, but there are signs that its heydays might be numbered.

One of those signs appeared during the past week, with the announcement of an innovative offering from an Indian-based company called Instant Collaboration Software Technologies. Established by the same guy who created Hotmail, Sabeer Bhatia, the company has devised a new office productivity suite that is already attracting a lot of attention.

Called Live Documents, the service allows users to create and manage documents through a browser interface or inside an existing desktop application. It’s essentially a combination of a web-based document system and a traditional PC-based version.

On one hand it competes with offerings such as Google Docs, but its ability to be used when disconnected from the internet sets it apart. Also, corporate users can opt to host the application within their current IT infrastructure, rather than trusting a third-party provider.

Existing Microsoft Office users are able to to take advantage of the new service. They can create documents offline which will then be synchronised with the centrally stored versions next time they are online. The company has plans to also make its offering compatible with Open Office.

It has to be recognised that web-based productivity applications have been available for quite some time and have been fairly slow to gather momentum. While the trend is being closely watched by Microsoft, there hasn’t as yet been a lot to cause the company any concern.

But Live Documents could well be the one that makes Redmond sit up and pay a little more attention. The fact that corporates can host the necessary software internally is likely to make the offering more appealing.

Bahatia himself says the whole concept of shrink-wrapped software has only a few more years to run. At the launch of his new service, he said 2010 would be the year the balance would change.

Rest assured, Microsoft is not going to sit idly by and watch its cash cow's output dry up. Chances are strong that it already has a Live Documents-style offering in its development labs.

Alternatively, it could dip into its vast cash reserves and simply buy Bhatia’s company. The Live Documents name would even sit well with Microsoft’s overall Live strategy. That would make it twice the software entrepreneur has received a large wad of readies from the desktop giant.

It’s too early to call a winner in this particular battle yet, but watching how it plays out during the next couple of years will be very interesting. A new cow might be needed sooner than anyone thought.