When Microsoft broadly launches its new Windows Vista operating system and Office 2007 productivity suite in New York later this month, the release will mark the first time in a dozen years that the company has made new versions of Windows and Office available at the same time. That could make upgrading easier for companies that prefer wholesale updates of their PCs, and more quickly usher in an era of 64-bit computing on the mass-market desktop, Microsoft chairman Bill Gates noted this week.

Yet Microsoft also faces an increasingly direct challenge to its Office franchise from Google, a risky redesign of the suite's most popular apps, and a partnership with SAP that Microsoft corporate VP Chris Capossela says has "just scratched the surface" of its potential. Those comments came in an interview at the Consumer Electronics Show in Las Vegas this week.

One of Office 2007's biggest selling points is its ability to increase the productivity of individual workers and teams. A big part of that will be a redesigned "Ribbon" user interface that largely dispenses with drop-down menus to expose features to users more naturally. Microsoft's user testing has shown the interface can help users get more done, but "there's always risk" that the market's reaction won't match that testing, Capossela says.

There are other productivity enhancements in Office '07 as well. The Ribbon "is so in your face," Capossela adds, but he also points to a new search engine in Microsoft's Outlook E-mail program to more efficiently find messages, the ability to read RSS feeds within Outlook, and XML file formats. "You couldn't pick something more technology-based," says Capossela of the new file types, but he argues they can increase the productivity of teams.

While Microsoft tries to get uptake of its new Office suite among businesses and consumers -- the product becomes generally available Jan. 30 -- competitor Google is promoting its Docs & Spreadsheets Web software for word processing and number-crunching. "We don't think a thin model is the winning strategy," says Capossela, who calls Google's claim that it doesn't want to replace Office on the PC desktop "disingenuous ... Everything they're doing is trying to displace Office," he says.

As a counterpoint, Microsoft's Office group is starting to build capabilities from the latest version of it Sharepoint server into its Office Live site for small businesses. For example, Microsoft recently made available the ability for users of PowerPoint 2007 to share slides and notify colleagues of changes to a presentation using an online Slide Library feature. "As soon as you introduce a server into the background -- which could be in the cloud -- you create these new collaboration scenarios," Capossela says.

There's also more work to be done with business apps vendor SAP. The companies last June began co-selling Duet software that can tie business data from SAP's accounting, human resources, and inventory software systems to Microsoft's Outlook E-mail program. The companies say Duet will later be able to funnel data to other Microsoft Office apps, including Excel.