The new service, called Office 365, is available as a limited test from Tuesday, and will be on sale on a subscription basis worldwide next year.
Combining some of Microsoft's existing cloud-based services, it will be available through most browsers and on mobile devices.
That means customers can get access to Office programs like Outlook e-mail and SharePoint websites without installing software, from virtually anywhere.
The move strikes a blow against rival Google, which has had some success with its Google Apps service, which provides a low-cost, Web-based alternative to Microsoft's traditional Office software.
Shares of Microsoft were down 2.7 percent at $25.12 in morning trading, while Google fell 1.1 percent to $610.95.
Microsoft is doubling down on its commitment to the cloud with the launch of Office 365, a service that combines Microsoft Office, SharePoint Online, Exchange Online and Lync Online with the cloud.
Announced at a press event in San Francisco by Kurt DelBane, president of Microsoft's office division, Office 365 is a subscription service that integrates cloud-based syncing, collaboration, and accessibility to businesses and organizations worldwide. So long as a device supports ActiveSync, customers can access their e-mail, calendars, team websites and office web apps from anywhere. The inclusion of Lync also means that Office 365 has videoconferencing capabilities.
There are two editions of Office 365. Office 365 for Small Businesses is designed for organizations of one to 25 people. It's a pre-built package that includes Office Web Apps, Lync, e-mail sync, and more. It doesn't require IT support on the user's end and will cost $6 per user per month.
The second version is Office 365 for Enterprises. Unlike the small business version, the enterprise edition can be customized based on an organization's needs. It can be customized so different teams have different access levels to Office 365's features. The enterprise edition comes with everything in the small business version, plus single sign-in, Office Pro Plus (via subscription), internal social networking tools, voicemail in the inbox, and more. It costs anywhere between $2 to $27 per user per month, depending on which features the company chooses to utilize.
The beta will be available to a few thousand organizations starting today; its full launch will occur sometime next year in 40 countries. Sometime in late 2011, Office 365 will add Microsoft Dynamics CRM to its suite of products.
Microsoft is extraordinarily bullish on the cloud. DelBane said that the company believes the cloud is as radical of an innovation as the graphical user interface. Office 365 just makes sense though; the rising demand for enterprise-level cloud apps like Dropbox and Box.net is due to its ability to help teams collaborate and coordinate their efforts.