Seemingly beset on all sides by rivals attacking its multibillion-dollar Office business, Microsoft this week struck back with an online office services of its own—albeit ones that require users to have the desktop version of Office as well.

Whether the move is a brilliant ploy to embrace and extend its desktop dominance or a misstep that cedes the online office suite market to a growing group of competitors remains to be seen. But by tying its desktop software to its online services, Microsoft is declaring a clear challenge to competitors.

The move is a key component of its “software plus services” strategy, the idea that online services should enhance desktop software, not replace it.

Microsoft’s new services come in two flavors: “Live” services, targeting individuals, small businesses and workgroups (and including not only productivity apps but entertainment as well); and “Online” services, which are aimed exclusively at enterprise-class users.

For service providers, Microsoft’s announcement bears watching for several reasons. Its consumer-oriented “Live” services will compete with similar offerings delivered via telco broadband portals and IPTV systems. Meanwhile, telcos have been teaming with Microsoft and other partners to deliver hosted versions of Microsoft enterprise applications, most notably hosted Exchange and Sharepoint services. It’s unclear the degree to which Microsoft’s move into hosted enterprise apps will disrupt those partnerships—though Microsoft stressed it will continue to work with partners to deliver hosted services.

The most notable of the announcements was the Microsoft Office Live Workspace, a free, online extension of Microsoft Office that lets users store and share their documents online. Users can save more than 1000 Microsoft Office documents online. They can also edit those documents online--if they have Microsoft Office tools on their desktops as well. If you don’t have Word or Excel or other Office apps, you can still view the docs and comment on them online.

That’s a much different approach than Microsoft competitors have taken. Google, Zoho, Zimbra and many other companies have launched so-called “Web office” suites that let users perform standard office functions within a Web browser—usually at no cost.

While those services should appeal to many users, others may not be so quick to toss out the familiar Microsoft Office environment. Adding Web-based storage and sharing appears to represent a compromise between a pure desktop application and the newer browser-based competitors.

To confuse matters a bit, Microsoft this week renamed its existing Microsoft Office Live Service to Microsoft Office Live Small Business. That service offers small businesses free Web sites, email and other basic online services.