Microsoft will launch Wednesday its highly anticipated Office Live product, a set of services aimed at bringing online small business with less than ten employees. Office Live will offer e-mail, Web domains, Web site hosting and other services for free during the beta.

After the beta ends, a basic package of services would stay free, however higher-tier packages would be sold on a subscription basis, likely for less than $50 per month.

Office Live Basics, the free entry level service, would give subscribers domain hosting, five e-mail addresses with 2GB of storage, 30MB of server storage space for their site, a 10GB bandwidth limit, basic Web site statistics, and e-mail based support.

Office Live Essentials offers the same services as the basic package, but with 50 e-mail addresses, 50MB of space, 25GB of bandwidth, telephone support, and more advanced statistics. Additionally, users would gain access to 20 business applications.

Microsoft also said it would just sell the business applications themselves in a package called Office Live Collaboration.

Jupiter Research senior analyst Joe Wilcox says that Microsoft is creating a new market for those smaller companies who may find Exchange, SharePoint or Project too expensive or too cumbersome to manage.

"Microsoft's approach extends those products' capabilities, and their potential benefits, to the smallest businesses," Wilcox explained. "As those businesses grow, Microsoft has created opportunity for its partners to upsell server software that would maintain and extend Office Live capabilities. Smart."

However he stressed that these products are not hosted versions of Microsoft Office products, as the name may confuse some into believing. In fact, Wilcox said he doubts the Redmond company would ever get into the hosted applications business.

Future additions to the Office Live product lineup include e-commerce applications, as well as keyword advertising for customers.

Wilcox says that more than half of Microsoft revenues come from small business, so the Office Live concept makes sense in that respect. "A hosted service option would provide small businesses with tools they can immediately use without making a hefty, upfront investment," he said.