On Monday in San Francisco, Microsoft CEO Steve Ballmer unveiled the latest edition of Microsoft Office--the most ambitious release in the productivity software's history, he said.

Indeed, you might not recognize Word, PowerPoint, and other applications in the Office suite. That's because they were redesigned to make the most of the Windows 8 operating system, work with mobile devices such as the new Surface tablets Microsoft recently unveiled, and operate in the cloud so you can get access to your files and information regardless of where you are or what machine you're using.

Ballmer talked about how the company's flagship product is now focused first on being a service. While Microsoft will continue to provide Office as software you can install on your computer, the new Office was designed primarily as a service in which the applications and most of your files sit in the cloud.

While the company won't admit it, experts say Microsoft's next-generation version of Office is one of many moves it is making to fend off the inroads Google is making on the business-software market with Google Apps.

According to The Wall Street Journal, even though Microsoft Office still has more than 90% market share for business-productivity software and more than an 80% share of corporate email, research firm Gartner recently reported that Google is bringing into its fold one-third to half of new corporate users who are paying for Web-based software.

The competition is great for business users--the new Office looks like an ultramodern and massive improvement over the current version. Several things you'll notice:

Touch modernizes Office apps.

Touch makes using Office apps on your tablet seem markedly more intuitive and simple. Kirk Koenigsbauer, a corporate VP for Microsoft Office, used a tablet to show how swiping, pinching, zooming, and tapping works with applications such as PowerPoint and Word.

No more paper note taking.

The topic of "inking" came up several times during Microsoft's demo. The new Office lets you use a stylus to do things like handwrite emails and convert them to text, or as a laser pointer when presenting.

PowerPoint on the tablet rocks.

Koenigsbauer said the tablet's screen is now a "cockpit," so when you're giving a PowerPoint presentation, not only can you use your digital pen to mark up slides on the fly, you can also see upcoming slides and notes, as well as a new clock and timer so you don't go overtime.

Drag and drop makes consuming data and collaborating simple.

Koenigsbauer showed off OneNote and Lync--Windows 8 style applications for Office that are optimized for touch.

OneNote, a digital note-taking app, organizes information such as text, pictures, notes, Web content, lists, and more. You can use the tablet's camera to snap a picture of a paper advertisement, for example, then crop part of it and drag and drop it into OneNote.

Lync is Microsoft's unified communications platform integrated into Office, and it includes instant messaging, audio, video, Web conferencing, and location information so you can see where your contacts are. In a multiperson video chat using Lync, you can drag and drop someone from your contact list into the live meeting, drop a PowerPoint presentation onto the shared canvas, draw on the presentation with a touchscreen device, and share OneNote notebooks with others in the call, as well as take and display notes.

Cloud storage is the default.

Although your documents will still be available offline, the new Office saves documents to SkyDrive by default, so you can get at your content regardless of what computer or device you're using. And once signed in to Office, your personal settings, most recently used files, templates, and custom dictionary show up on whatever machine you're using.

The new Office is social.

Microsoft acquired Yammer last month for $1.2 billion, proving that the software giant is serious about social. While Koenigsbauer talked about how people can use Yammer and SharePoint for business social networking, the "People Card" looks particularly useful. For each of your contacts, this card shows you the person's location, photos, and contact information, as well as status updates from Facebook and LinkedIn.

You can create awesome presentations.

Microsoft's acquisition of Perceptive Pixel now makes it possible for you to use 82-inch touch- and stylus-enabled displays for meetings and presentations. Koenigsbauer stood in front of a huge screen and used his hand to swipe across tiles of apps that he could access during a presentation. As an example, he tapped on a weather app to pull off an "Al Roker" weatherman-like imitation with the large digital backdrop.

Choose from three new subscription services.

Though Microsoft didn't say how much the new subscription services will be when they're officially announced in the fall, there will be three editions, and each will include the 2013 editions of Word, Excel, PowerPoint, OneNote, Outlook, Publisher and Access:

  • Office 365 Home Premium for families and consumers, which comes with an additional 20GB of SkyDrive storage and 60 minutes of Skype world minutes per month;
  • Office 365 Small Business Premium for small businesses, which includes business-grade email, shared calendars, website tools, and HD Web conferencing; and
  • Office 365 ProPlus for enterprise customers, which provides advanced business and cloud deployment features.

Check it out: The customer preview is available at office.com/preview.