Microsoft has announced Albany; a subscription-based version of Office, OneCare virus scan and firewall, Mail, Messenger and Photo Gallery rolled into one package not looking at all dissimilar to Google Apps and Google Documents. Except, of course, that it’s not going to be free.

Though Albany’s Group Product Manager would have us believe that Albany was conceived in response to Microsoft’s own market research; it’s clear that it has been Google’s success in offering applications and, critically, office functionality online that has spurred Microsoft to take its stalwart Office suite out of the box and put it online.

Albany will allow customers to download and keep updated the suite of applications on offer, and keep documents stored online for easy access from anywhere in the world. Critically for the Office applications, this is not an entirely online operation. Microsoft Office Home and Student Edition 2007 will be downloaded to your computer, and all of the good stuff will be client-side. This differs from Google Documents, which has the application run through Cloud based networking into your browser.

In terms of functionality, nothing beats Microsoft office. Not OpenOffice and certainly not Google Documents, to name but two competitors. But consumers have been looking for something else besides just feature set. What has made Google Documents so successful has been that it is free, it is easy to use and comes with no setup beyond having a Google account, and you can store and share your documents online and convert them into more standard formats, such as .PDF and .doc, with two clicks.

With Albany Microsoft is not targeting, or if it is it should reconsider its strategy, the customer who wants to be able to create relatively simple documents with no fuss. Albany is aimed at current and former Office users who will want to make their lives slightly less complicated, or who prefer a subscription based system. Albany will not break new markets for Microsoft Office, but it might help the firm to keep some of its existing customers happy – this is a very valid business decision to make, but in comparing Albany to Google Apps one must remember that Microsoft cannot really compete in this sphere unless it is offering a free product.

There’s still room for Microsoft to make a very good stab at beating Google in the online applications realm. Their products, particularly Office, are far more advanced than what Google is offering. Microsoft could release a dumbed-down version of Office that is still streets ahead of Google Docs.

But then Microsoft risks getting into a feature war with Google, until eventually most of Office’s functionality would have to be free to keep up. In the meantime, even releasing part of Office’s functionality as a free online service could lose Microsoft a lot of its current premium customers who only use a limited percentage of the total amount of features on offer.