Though a price point has yet to be set, so it remains unclear whether Albany will offer an significant savings over purchasing its components separately, it is significant for two reasons. First, it adds a wrapper around each of its compotents that automatically sets them up for consumers in just a couple of clicks. The wrapper acts as a launcher for the various pieces of Albany, which includes office, productivity, messaging, and security software, and also keeps the compontents up to date.

Second, Albany will be offered as a subscription service, and users will be entitled to automatic upgrades for the duration of their subsciption contract. It's not quite a web app, but it does take a page out of the web app play book by going the subscription route -- a direction that Microsoft is known to be heading.

While Albany, which will get a new name for before a launch tentatively scheduled for later this year, is not as compelling as the true online office web application that we've all be waiting and hoping for, it is still a shot at Google's online office offerings. Clearly, this is a consumer play for Microsoft, and Google's office suite is not ready for the enterprise (see also here from Zimbra and here from Microsoft).

Even though Albany won't be a true web office offering, it is a likely low-cost alternative to Google Docs that lives on a user's PC -- something that is still more comfortable and familiar to many mainstream users -- is all inclusive, and ties into Microsoft online services. We still hope that Microsoft eventually bites the bullet and releases an RIA version of Office that exists in the cloud, but Albany is a smart consumer offering in the meantime that may stem the flow of users jumping ship for free online alternatives by making things easier, more tightly integrated to the online Live product family, and potentially cheaper.

"You know, you look at some traction that some of our competitors have gotten. It’s quite small. It’s quite niche. And I think one of the advantages I think Microsoft brings on the table is how can we scale this kind of capability to millions and millions of people. And Office Live Workspace is really the first service that’s in this area. And you’re going to see us, which we’ve already showed, is we’re going to rapidly improve it."

Eric Gilmore also clarified the confusion around the Microsoft Live brand:

"When we think of Live, it’s all user managed. So the content is all about me. All the services is, kind of, I control -- my company or my organization I work for really don’t control live services. That’s kind of the piece that’s important. And typically, live services today are free, so they’re free online so they can take advantage of that."
emphasis ours

This is an interesting point, becase traditionally Microsoft Office has been a system controlled by the IT department and CIOs. With Office Live Workspace, contends Gilmore, much of the control goes back to the user. So the question becomes: how are CIOs and the IT department dealing with that? I thought Gilmore's response to this was especially revealing about Microsoft's Office Live strategy:

"Well, I talk a lot to CIOs and other businesspeople and enterprises.

And I think they’re really grappling with trendy term of consumerization of IT. They’re seeing this kind of wave of really innovative Web 2.0 application sinking into the enterprise. And quite frankly, they’re struggling with how to deal with them. Do they embrace them? Do they shut them down? And I think there are significant challenges they have to deal with: Security, privacy, manageability, a lot of the core things that IT professionals care about.

When we look at the problem they have to deal with, a lot of times, we get the question, "Do you guys support Workspace being in the enterprise?" And I absolutely respond, "We love it. We hope people use it." If it goes in the enterprise, it’s a great thing because typically it’s solving frustration or pain for those employees. And today, a CIO and IT pro have to deal with consumer email being the biggest leak in information outside the firewall.

And we look at Workspace as providing a great collab experience, whether it’s ad hoc collaboration or not, if you don’t have something like SharePoint where there is a lot of that security and privacy manageability aspects to the infrastructure. So we think it’s a bridging aspect. It’s better than email. We think it’s a great ad hoc collaboration. It’s free."
emphasis ours

Eric concludes that longer term, Microsoft sees Office Live Workspace as "a way to bridge the gap between the Live ID world and the Active Directory world."

Conclusion

Perhaps what it comes down to, when comparing Microsoft Office Live Workspace with Google Docs, is this: Microsoft sees its product as a 'lite' version of SharePoint; whereas Google, despite its past protestations that it aims to complement Microsoft Office and not replace it, is very much about routing around the need for big bulky desktop apps like MS Office and SharePoint.

The word "bridging" or "bridge" was used a few times in the podcast, which to me indicates that Office Live Workspace is just as much about enticing customers to 'upgrade' to the desktop experience (MS Office, SharePoint) than it is about bringing the Web to MS Office users. This is an entirely valid strategy, but it still means that Microsoft's entire office strategy depends on desktop software.

That leaves the door ajar for the likes of Google and Zoho to take market share from MS Office, over time, by providing a completely 'web native' approach.

Check out the full podcast with Eric Gilmore of Microsoft on ReadWriteTalk.

In September of 2006, Reuters reported that Microsoft was considering releasing an online version of Works to preempt the then unreleased Google Docs and Spreadsheets Internet application. A year later, in August 2007, a rumor surfaced that Works was going free and ad-supported in an attempt to compete with Google, but would still be a desktop application. Neither rumor panned out. Works remains a for-pay, desktop application that doesn't appear to have anything to do with Microsoft's web office strategy.

Like the previous rumors before it, evidence is now mounting that Albany too is not related to Works. So what is Albany? Mary-Jo Foley reported this morning that it is apparently going to be a so-called "ValueBox" offering that bundles three Microsoft Office components. According to one source, Albany will bring together Windows Live OneCare, Office Live Workspace, and Office Home and Student Edition.

The term "ValueBox," which was taken from a screenshot of the Albany beta sign up page that Foley got her hands on, seems to indicate that the Albany bundle might be offered at a discount, which in turn points to this being part of Microsoft's attempt to draw users away from the freely offered Google Docs online office suite. As Foley points out, Microsoft might be smart to target students, who have been one of their biggest user bases for Office Live Workspace, and whose generally tight budgets make Google's free offering especially attractive. (Google Docs is so far not generally considered ready for the enterprise.)

But will it work? We published a head-to-head feature comparison of Google Docs and Office Live Workspace earlier this month and found that both services have a very similar feature set. The main difference, though, is that Google Docs is a web application, which means that it 1. doesn't require desktop software to be installed, and 2. allows for things like real-time online collaboration. Those are two very alluring features. Plus, I'm not convinced that Microsoft could offer enough value in its "ValueBox" to really attract students. Many schools offer Office Home and Student at such a deeply discounted rate (for example, my girlfriend -- who is a student -- recently purchased a copy from her university's bookstore for about $10), that it seems unlikely that Microsoft would discount the bundle far enough to compete with current student pricing.