In five years, Microsoft expects half of all enterprise employees with e-mail to use a combined online and premises-based system like the company's Exchange Online, an executive said Monday at a launch event for that software and the SharePoint Online hosted collaboration application.

About 500,000 users have already adopted Exchange Online since a limited release for large enterprises in October 2007, said Stephen Elop, president of the Microsoft Business Division, at the event in San Francisco. That release made the two applications available, on dedicated Microsoft servers, to enterprises with 5,000 or more employees. Starting Monday, the services are available to all small, medium-sized and large organizations in the U.S., hosted on shared resources at Microsoft. They can be purchased online or through partners. The offering had been available previously in a beta test.

Though the hosted applications have been slowly rolling out over time, their wide availability is a key step in Microsoft's transition from a maker of client and server applications to a provider of ones that are hosted in the Internet "cloud" and available through any browser. The company is facing a growing trend toward hosted applications, led by giants such as Salesforce.com and Google. Elop acknowledged the shift.

"We believe this is part of a generational shift," Elop said.

Exchange Online and SharePoint Online can be purchased as part of the Microsoft Online Services Suite, which also includes Office Live Meeting and Office Communications Online, for US$15 per user per month. They are also available individually, priced at $10 per user per month for Exchange Online and $7.25 per person per month for SharePoint Online. The administrator functions of the applications announced Monday are only available in English, but end users can set their own languages through the same language tool that's in Outlook.

The applications released Monday can be used through a browser, a PC client or any mobile device that works with Microsoft's ActiveSync, with data synchronized automatically when users go online. This online-offline capability is a major feature that sets Microsoft's hosted applications apart from those of competitors such as Google Apps, said Eron Kelly, senior director of business online services marketing. It's critical to let users work with their mail, calendars and other information when they can't get Internet access, he said.

Another version of the applications for online-only use is available now under the large-enterprise program and will come out for all businesses in the first half of 2009, Kelly said. That version is designed for employees who don't have a PC dedicated to them, such as drivers and manufacturing workers, he said. It costs $2 per user per month for either Exchange or SharePoint, or $3 per user per month for the entire suite, he said.

Enterprises or partners can customize the user experience by writing "Web parts" and linking them to the applications, Elop said. For example, Microsoft demonstrated a Web part accessible through SharePoint Online that showed a sales team's progress against its objectives. That component was written in Silverlight and pulled up-to-date information from a database. Microsoft has opened up some APIs (application programming interfaces) to let enterprises or partners link up their own cloud-based services with hosted SharePoint and Exchange, Kelly said.

Partners voiced concern in March when Microsoft announced it would host applications itself, fearing they would end up in competition with the software giant. But with customization capabilities, partners have a better opportunity now to differentiate themselves, Kelly said. And if they don't have to deploy servers and other infrastructure at customers' premises, selling hosted software instead, the partners can draw in customers that might not have the capital today to buy those physical deployments, he added.

Another overture to partners is already a hit, Microsoft said. At its Worldwide Partner Conference in July, Microsoft announced a program under which partners can receive an ongoing annuity revenue stream for online services they sell. That comes on top of any revenue they earn for performing integration, migration and other services for their customers. Since that time, more than 1,500 partners have signed on to that program, Elop said. With Exchange Online and SharePoint Online now available to all sizes of businesses through partners, they can now begin to reap the benefits of the program, he said.