"The simple argument that 'this is good enough for 90 percent of what we do' has fallen on its face over and over and over again," Leblond told Reuters in an interview on Tuesday. "When it comes to mission critical things and key pieces of how people run their businesses, the threshold is higher."
Microsoft will release the long-awaited Office upgrade to business customers next week along with its new Windows Vista operating system, which has been more than five years in the making. These products are the core of a broad product upgrade cycle aimed at restoring the software giant's growth.
Microsoft believes new Web services will work in tandem with PC-installed software, a vision that differs from that of "software as a service" advocates, such as Salesforce.com and Google, who expect services delivered over the Web to eventually replace software that resides on local PCs.
It's a bet with big stakes, considering Office accounts for nearly a third of Microsoft's total revenue and half its profits, and particularly since the company has been unable to replicate its desktop success on the Internet.
Already the clear leader in Web search, Google has in recent months pushed out new applications to rival individual Office programs, including e-mail for organizations, employee Web pages, scheduling, spreadsheets and word processing.
Google Chief Executive Eric Schmidt has dismissed the notion that it is competing with Office, saying his company is focused on simple applications with an emphasis on sharing that are aimed at consumers and small business users.
Microsoft's new Office Live is an example of its "software plus services" approach. It lets small businesses set up Web sites, company-branded e-mail and Web applications to allow project management and collaboration. It works with Office but the programs are largely different from those familiar to desktop PC users.
The latest upgrade, Office 2007, will be available to consumers in January, but Leblond said don't necessarily expect a huge spike in demand, as adoption patterns have changed.