The next big free download: Microsoft Office

Microsoft, which has built a $20 billion business out of its MS Office suite of tools, has decided to give them away for free.

The company today announced plans to release a free version of its Office software that users can access over the Internet. The version will be released in the first half of next year, in conjunction with the retail release of Office 2010.

Versions of MS Word, PowerPoint and Excel will be available online.

It’s a surprising move by Microsoft, but one that was likely inevitable.

Office remains the dominant desktop software package on the market, but it has been fighting the move from desktop to Web for several years. In 1996, Google launched a free competing product online that has built a small, but notable, following of users. (Corporations have typically stuck with Microsoft’s products.)

The web applications will be ad supported, which is a slight deviation from Google’s model.

Don’t view this as a surrender by Microsoft or a capitulation to the inevitable. Businesses will likely stick with the desktop applications for the foreseeable future, with security of sensitive documents top of mind.

A migration to Web-based office software over the long term, though, is likely to continue – and this will begin to give the company a chance to establish a foothold and better position it against any threat from Google.