"I think they'll want to offer something to MSN and Office Live users, but they'll want to make sure they leverage their strengths -- and tie whatever they offer into their desktop products," said Melissa Webster, an analyst at IDC.

"Microsoft is not going to lose its Office software franchise anytime soon," said Dustin Rector, an analyst at Tier 1 Research. But "if Microsoft chooses to sit this one out, they will begin to lose out long-term."

Marc O'Brien, founder and president of Projity, said Microsoft already is losing ground. In the three months since his firm released its Project-On-Demand application, it has gained 100 user companies, a combination of paying and trial customers. "Today's project teams are much more likely to be geographically dispersed. That's a good thing for us," he said.

Project-On-Demand is part of Salesforce.com Inc.'s AppExchange network; as a result, it is tightly integrated with Salesforce.com's CRM application and its hosted user data and is available to Salesforce.com's 450,000 users.

O'Brien said customers include smaller firms as well as some Fortune 500 companies. But Webster believes that early adopters will tend to be consumers and small companies.