Microsoft often uses the phrase "feature parity" to describe its vision of providing cloud computing services that closely replicate the capabilities customers can already get by installing Microsoft software inside their firewalls. After all, Microsoft is "all in" for the cloud, as Steve Ballmer says.While Microsoft's hosted Exchange and SharePoint will achieve most of the desired feature parity within the next year, Microsoft admits it has no plans today to provide the same parity with Office Web Apps, the Web-based versions of Word, Excel, PowerPoint and OneNote.5 tips for managing Microsoft licensing costsOffice Web Apps, released in June, provides a "high-fidelity viewing experience," but only limited editing capabilities, says Evan Lew, senior product manager for Microsoft Office.Lew blames the disparity on the limitations of current Web browsers (of which the most widely used is Microsoft's Internet Explorer)."It has to do with the capabilities of the Web browser and the limitations today," Lew says.With the addition of HTML5 "the lines [between PC and browser] may start blurring," he continues, but as of "today, there are performance reasons why editing, video and PowerPoint is something that is a much better experience in the client than in the browser."Microsoft touts the ability to import Office documents into Office Web Apps without losing formatting -- a supposed advantage over Google Apps -- but editing scenarios like inserting charts or pivot tables into Excel and editing videos require the horsepower of the PC and native desktop client, Lew says.Microsoft is meeting the challenge from Google Apps by providing some online capabilities, but likely doesn't want to give businesses a completely Web-based alternative to replace the more expensive Office, Forrester Research analyst Sheri McLeish said in a recent interview."They're walking a very fine line," McLeish says. "While they're nervous and worried [about Google Apps], they're not nervous and worried enough to dramatically reduce the cost of Office. They're delicately managing the pricing to protect their margins."Regular Office licenses give customers rights to use Web Apps, but a full-fledged cloud offering "is not going to happen in 2010," McLeish says.Things are a bit different on the hosted Exchange and SharePoint front, at least according to Microsoft's spokespeople.Formally known as BPOS, the Business Productivity Online Standard Suite, Microsoft's hosted Exchange and SharePoint is still running on the 2007 servers. \u00a0But a planned upgrade to the 2010 servers will erase most of the feature differences between the hosted and on-premise versions, according to Microsoft.The largest cloud customers have received the 2010 upgrade already, a broader preview will be available later in 2010, and full general availability is expected in 2011.Upgrades in 2010 server rollout that will bring BPOS closer to feature parity, include getting voice mails in e-mail inboxes, role-based access controls, single-sign-on between on-premise and cloud, and the ability to upload custom code to SharePoint Online."We're working toward a goal we call service parity," says John Betz, director of product management for Microsoft Online Services.Customization is limited today, because the 2007 servers don't fully embrace the concept of multi-tenancy, Betz says. With the 2010 rollout, customers will have access to the My Sites feature, which lets them run code in a sandbox, a separate process that has limited access rights and wouldn't be able to take down an entire server farm.Not every feature in BPOS will be exactly the same as the on-premise version, however. For example, BPOS support for data protected by ITAR (International Traffic in Arms Regulations) is available only for government agencies. Also, customers need their own PBX system when they integrate voice capabilities with Office Communications Online, because of network latency issues.Another BPOS limitation, mentioned in a recent Microsoft blog, is lack of support for the Office 2003 client."We won't achieve complete feature parity," because certain processes need to run on a customer's own servers, for a variety of reasons, Betz says.In addition to BPOS, there are other examples of Microsoft trying to provide similar functionality in the cloud as they do in packaged software. The next version of Microsoft's CRM product will let IT customize their CRM deployments in the cloud the same way they can on-premise, for example with complex .NET programs, says Brad Wilson, general manager of Microsoft's CRM business.Microsoft has also turned some of its cloud capabilities into on-premise technology with the Windows Azure Platform appliance, which lets businesses run an Azure-like private cloud within their firewalls.Why does BPOS get a better "feature parity" treatment than Office Web Apps? With BPOS, Microsoft is operating the backend servers on a customer's behalf, in the cloud, in much the same way customers would operate the servers themselves."With SharePoint, the SharePoint navigation experience manifests itself in the browser whether it's on-premise or hosted in Microsoft [data center]," Lew notes.Tim O'Brien, senior director of Microsoft's Platform Strategy Group, recalls showing BPOS to a customer at a conference:\u00a0"He's looking somewhat underwhelmed during the demo, and he shrugged his shoulders and he said 'it's just SharePoint.' But that's exactly the point. Your investment in SharePoint moves forward."But Office Web Apps, which requires a SharePoint 2010 back end, isn't likely to offer the same functionality as Office on-premise anytime soon. Although Lew promises improvement, he says it's too early to say what features will be added. Complete replication of features across the online and on-premise versions of Office is not being promised by Microsoft, at least today."We don't really see Office Web Apps as a replacement scenario," Lew says. "It's really more of a companion for people who already use Office."Follow Jon Brodkin on Twitter: www.twitter.com\/jbrodkinRead more about data center in Network World's Data Center section.