Microsoft is planning a full range of web-based software products, including Office, in response to the weak economic climate.
The company expects the downturn to accelerate growth of the nascent web-based software market, a senior executive said.
Stephen Elop, president of Microsoft's business division, is leading the company's entry into the Software as a Service (SaaS) market.
"What we think is in five years, 50 percent of the use of Exchange and Sharepoint could be serviced from the cloud," Elop said.
"Between now and then, a year or two or whatever, if it's going to be tough economic times, that means we expect quite a lot of movement in that direction, a lot of people taking advantage of that," he added. "I think the economy will help it."
Microsoft's foray into online software services comes amid competition from Google. Its Google Apps suite offers free web services including calendar, collaboration, email and messaging software.
Microsoft has said it plans to upgrade its Office business software to include online versions of the popular Word and Excel applications. Elop said the company would soon announce a wide range of services, including free versions supported by advertising.
"We expect fully that the full range of Office utilities, from the most advanced to simpler lightweight versions, will be available with a range of options: ad-funded, subscriptions-based, traditional licensing fees, and so forth. So you should expect to see that full array," he said.
Elop declined to specify when the services would be launched, but said "in 2009 you're going to see a lot of advance in this area."
Microsoft will likely make a profit from the new initiative within a year after the launch, he said.
He also said that even the basic, free versions will trump Google Apps in capabilities, and that Microsoft will ensure that users can move Office documents in and out of the web browser environment without any garbling to the text.
