Creative Reporter Pete Cashmore thinks that MS finally got it.

I haven't posted on the Windows Live news yet because I think we need some time for the dust to settle. My thoughts so far? This is not really about products - some of the "announcements" are just repackaging of old stuff - the real change is a philosophical one. Microsoft, once so hopelessly devoted to the desktop paradigm, has finally admitted defeat and embraced the web as platform. Microsoft has a new religion, and its name is 2.0.

From the NYTimes:

Microsoft introduced on Tuesday two new advertising-supported Web services, Windows Live and Office Live, as a direct response to the formidable challenges posed by its major competitors, Google and Yahoo.

The new online initiatives will deliver services to businesses and consumers directly via the Web, in many cases, without the need to download the applications to a computer. As such, they are an important step in extending Microsoft's reach beyond the desktop PC to smart phones and other Internet-connected devices.

Bill Gates, the chairman of Microsoft, foresees an era of "live software."

The strategic shift also represents an acknowledgment by the company, the world's largest software publisher, that the Internet has once again changed the rules of business, forcing Microsoft to scramble to catch up.

These guys are late to the party and they don't even have an invite. Does it matter? Not at all. If this is more than just idle talk and Microsoft does truly "get it", then we're all screwed. Mike at TechCrunch said it best: "After what I saw today, I despair for many a silicon valley startup."

Pete Cashmore is an entrepreneur and internet expert. His favorite buzzwords are Ruby on Rails, AJAX, blogging, Googlezon, home fabrication and RSS.