Microsoft is ramping up its software-as-a-service client offering to defend against a possible move by users to web-based services.

The software giant has released a free package boasting a unified installation and updating capability that will provide users with Live Mail, Live Messenger 8.5, Live Photo Gallery, Live OneCare Family Safety security program, and blogging program Live Writer in one download.

The move is a significant step for Microsoft in marrying desktop and web-based services and will take it into competition with Google and offerings such as the Google Pack of free software that includes the StarOffice set of productivity applications, toolbars, and security and communications tools. However, Google’s Apps group also owns several web-based applications for wordprocessing, spreadsheets and presentations, as well as email and IM programs.

By contrast, Microsoft currently lacks any online versions of Word, Excel and PowerPoint, the applications that have made it a corporate standard. However, the company has hinted that it could make changes that allow users to run programs online and offline, and the company has other web-based services in beta such as FolderShare, a utility for synchronising folders across Windows PCs and Macs, and a storage facility currently in beta and called SkyDrive. Other developments with a business function include Live Barcode for swapping contact data.”

The challenge for Microsoft will be to edge into web-based services without losing its hugely valuable windows/office franchise.

“Microsoft is looking for a balance because at the end of the day you’re going to have a local operating system even if it’s a thinner one than today,” said Michael Cherry, an analyst at independent research firm Directions On Microsoft.

“Microsoft has done some pretty non-customer friendly things such as Genuine Advantage without any significant impact on its market share. If we believe all the bad things, people should be feeling to the Apple store. The bigger question is whether Microsoft gets services and whether its services work on the browser we run. Microsoft seems to design everything for the recent version of Internet expolrere and maybe a little bit for the last version of IE and forget about Firefox [and other browsers].”

The competition in offering web-based software is in its early stages. In future, the market for web-based software is sure to heat up as users seek alternative ways to retain access to data and programs when their own PCs are not accessible. Another potential market driver could be the arrival of laptops with wireless internet access but no hard drive.