The software-as-a-service over the web is a rapidly growing market, with companies like Google and representing well established players. Microsoft, the world's largest software maker, is in the early stages of moving toward a services model in which the software resides in the internet cloud and is delivered over high-speed connections.

"This fundamental transformation to software and service is upon us" […] "It will affect us all, and I guarantee you Microsoft will lead in driving this next generation of computing and user-interface models just as we have the last couple of generations" Microsoft’s CEO Steve Ballmer said.
Microsoft plans to leverage their huge base of existing customers of traditional software to gain a competitive edge. Ballmer says that the transition from traditional PC software to an on-demand model will not happen overnight and will definitely not replace client-based software altogether, but rather offer customers a choice. Microsoft's Office Live, for instance, isn't anything like a hosted version of Office, but rather a set of services designed to extend Office and increase workplace productivity. Microsoft plans to re-brand its existing Office Live product as a small-business solution, while a separate set of Office Live services will be introduced for individuals.

Microsoft’s "cloud platform", otherwise known as Windows Live Core, is part of its Windows Live services and aims to unite the strengths of the desktop, enterprise IT, online services, and mobile devices.